Business, 13.11.2019 01:31 Jasten

If the central bank sells euro1 million of bonds and banks reduce their borrowings from the central bank by euro1 million, predict what will happen to the money supply. a. the monetary base would fall by euro2 million, leading to a decline in the money supply b. the monetary base would rise by euro2 million, leading to an increase in the money supply c. the sale of bonds would offset the reduction in borrowings so there would be no change in the monetary base and money supply d. the effect on the money supply is ambiguous

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