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23 May, 22:01

If the federal reserve sells $50000 in treasury bonds to a bank at 8% interest, what is the immediate effect on thhe money supply?

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  1. 23 May, 23:41
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    We assume, that the number 500000 is 100% - because it's the output value of the task. so we can write it down as 50000=%100. %8=x (immediate effect on money supply). Now we have 2 simple equations to solve.

    50000=100 & x=8

    50000/100=x/8

    cross multiply

    100x=4,000,000

    x=4,000,000 : 100

    x=40,000

    40,000 is the immediate effect on the money supply
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