Explanation Option (b): If the central bank wants to increase the money supply, it can buy bonds in open market operations or decrease reserve requirements. This is because the purchase of government securities or reducing the amount of reserve requirement by the central bank will inject money into the banking system. Thus, option (b) is correct. Option (a): The central bank can manage the economy by buying and selling of government securities through open market operations. If the central bank increases the reserve requirements, this will reduce the amount of money which is pumped into the economy by the banking sector...

The system of fractional reserve banking.

MACROECONOMICS+ACHIEVE 1-TERM AC (LL)

10th Edition

ISBN: 9781319467203

Author: Mankiw

Publisher: MAC HIGHER

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The system of fractional reserve banking.

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