How does open market operations affect the balance sheet of central bank?
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To understand how open market operations affect the money supply, consider the balance sheet of Happy Bank, displayed in Figure 1. ... The open market operation by the central bank causes Happy Bank to make loans instead of holding its assets in the form of government bonds, which expands the money supply.
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The open market operation by the central bank causes Happy Bank to make loans instead of holding its assets in the form of government bonds, which expands the money supply.
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