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In November 2020, the Central Bank of Mountville reduced the target overnight rate from 4% to 2%. Assume that the NBR is 1 billion M$ and that before the change.
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Explanation & Answer
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1
Macro Economics
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2
Macro Economics
QUESTION 1
(i)
Equilibrium of the initial under the reserve market appears at point E1. As a result, a decrease in
the overnight rate will read to an expansion in reserve, and there will be a movement that affects
the equilibrium (Syverson, 2019). Therefore, the pace of revenue in the market will diminish from
E1 to E2.
(ii)
An increment in...