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In the country of Extensia, the central bank engages in open market operations, using Extensia government bonds (T-Bonds).
1a. Calculate the money multiplier.
1b. Now, assume the Extensia Central Bank sells $1B worth of T-Bonds.
Will the money supply increase or decrease? Explain.
1c. Assuming no change in E (the proportion of deposits that banks want to hold as excess reserves), or R (the proportion of deposits that banks are required to hold), and no change in cash held by the public, what will be the new money supply in Extensia after the central bank's action? Show your calculations and formula
2) By one measure, the stock market has had an annual return of 0.5% (1/2 of 1 percent) per year since 2006.
If you had invested $10,000 in the market in 2006, how much would you have by 2011, exactly five years later
Assume you did not make any additions or withdrawals after your initial investment, and that your return was compounded annually. Round your final answer to the nearest cent.
