Purchase Solution

Monetary policy calculation with currency drain

Not what you're looking for?

Ask Custom Question

If the Bank of Canada sell $100 million worth of bonds to the public in an open market operation, what is the change in quantity of money that will eventually result? Assume that the currency drain is 0.15 and the desired reserve ratio is 0.05. Show your calculations.

Purchase this Solution

Solution Summary

How to calculate the effect on the money supply of an open market transaction by the central bank, accounting for the reserve ratio (RR), currency drain ratio (CDR) and money multiplier (MM).

Solution Preview

The Reserve Ratio (RR) is the ratio of assets that banks must hold as cash. The Currency Drain Ratio (CDR) is the ratio of assets that people want to ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.