The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks’ desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ________ government bonds.

A. sale of 500
B. purchase of 250
C. sale of 50.
D.  purchase of 50

ANSWER

D.  purchase of 50