In the economy of Robberia, the monetary base is $2,000. People hold half of their money in the form of currency (and thus half as bank deposits). Banks hold a quarter of their deposits in reserve. If, in the face of this panic, the central bank wants to conduct an open-market operation to keep the money supply at its original level, does it buy or sell government bonds? Calculate, in dollars, how much central bank needs to transact. The central bank sells $ worth of bonds.
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In the economy of Robberia, the monetary base is $2,000. People hold half of their money in the form...
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