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True or False A2-1. Suppose the consolidated balance sheet of an economy...

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Accounting

True or False

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A2-1. Suppose the consolidated balance sheet of an economy where the public holds all its money in the form of bank deposits is shown in the following table. If the banking system is originally in equilibrium and then the economy's central bank sells 50 worth of government bonds to the banking system, immediately after the transaction there is no change in the money supply, but after the banking system has returned to equilibrium, the money supply is reduced by 1000. [Hint: Use two additional balance sheets in your answer.] 2000 Assets: Reserves Government Bonds Loans Outstanding Total Liabilities: 100 Deposits 300 1800 Capital 2200 Total 200 2200

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