The following data represented the situation in the economy of Epsilon as of Jan

Question

The following data represented the situation in the economy of Epsilon as of January 1, 2016. O MPC = .75 Demand Deposits in the banking system = S100 billion Actual Reserves in the banking system - S20 billion Reserve Requirement, rr = .2 Current Unemployment Rate = 7.3% Current Rate of inflation 6.6% Natural Rate of Unemployment 5% Trend Rate of Inflation = 2% Use an aggregate demand/aggregate supply graph to show and explain the equilibrium in Epsilon as of January 1, 2016. During the first quarter of 2016 the Epsilon Central Bank. ECB. purchased $10. billion of government bonds from commercial banks. What is the maximum change in the money supply that could occur as a result of this policy (a numerical answer is required). Discuss any qualifications that could prevent such a change in the money supply from taking place. Using your graph from part "a" of this question along with a graph representing the money market, show and explain the objective and likely macroeconomic effects of this ECB monetary policy.

Explanation / Answer

Assigning oxidation states

O : -2

OH : -1

Mg3Si2O5(OH)4 : 0

H : +1

Mg : +2

Si : +4

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