What is the effect on the money supply

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Reference no: EM133717395

Problem

Explain carefully what a Central Bank open-market operation is and what effect an expansionary monetary policy that makes use of an open-market operation has on the size of the money supply, the rate of interest, investment, GDP and the price level. How is the size of a country's money supply likely to be affected by the following: the government (public sector) has a budget deficit and decides to borrow by selling bonds. What is the effect on the money supply if the government sells the bonds to the private non-bank sector? What is the effect on the money supply if the government sells the bonds to the Central Bank?

Reference no: EM133717395

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