Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of money market diagrams, explain how the money market will be affected. (b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium (c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this monetary policy.

Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter36: Six Debates Over Macroeconomic Policy
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Suppose the bank of Ghana purchases Ghc 180 million worth of Government of Ghana bonds to the public. ( a) With the aid of money market diagrams, explain how the money market will be affected.

(b) Explain what will happen to the interest and show why the change in the interest rate will restore the money market back to equilibrium

(c) Use the Keynesian Cross diagram to illustrate and explain how the goods market will be affected by this monetary policy.

(d) Using your answer in part (iii) above can you conclude that the above monetary policy is contractionary? Explain.

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