Question

what will the money supply if the central bank purchase a govetnment bond from an individual who deposits all the money that has been recieved for the sale in the bank?​

Answer 1

Answer:

If the central bank purchases a government bond from an individual who deposits all the money that has been received from the sale in the bank, it will cause money stock to increase in the banks. The deposited cash will act as reserves thus increasing the amount of money the bank can lend.