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If reserves are scarce, how would the money supply M change (increase or decrease) and why...

If reserves are scarce, how would the money supply M change (increase or decrease) and why (due to an increase, decrease, or no change in the monetary base B, in the reserve-deposit ratio rr, or in the currency-deposit ratio cr) if:


    (a) the central bank conducts overnight repurchase operations.
    (b) the central bank conducts overnight reverse repurchase operations.
    (c) the central bank increases the required reserve-deposit ratio.
    (d) an article reporting a significant surge in cases involving counterfeit currency becomes viral.
    (e) all drugs are legalized.

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Answer #1

The overnight repurchase of operations will increase the money supply and increase of required reserve-deposit ratio will decrease the money supply. So, the money supply will change if “central bank conducts overnight repurchase operations” and “the central bank increase the required reserve-deposit ratio”. So the correct options are “B” and “C”.The overnight repurchase of operations will increase the money supply and increase of required reserve-deposit ratio will decrease the money supply. So, the money supply will change if “central bank conducts overnight repurchase operations” and “the central bank increase the required reserve-deposit ratio”. So the correct options are “B” and “C”.

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