In the home economy, when "money" is a liability of the government, the supply of money is equal to:
A) gold reserves on a one-to-one basis.
B) the physical quantity of currency and coins in circulation.
C) the assets in a nation's account at the IMF.
D) the total of bonds (domestic credit) plus foreign currency and gold reserves held by the central bank.

Question

Quizplus · Accepted Answer

In a home economy where "money" is a liability of the government, the supply of money is determined by the central bank, which holds the domestic credit (bonds) and foreign currency and gold reserves. Therefore, the total of bonds (domestic credit) plus foreign currency and gold reserves held by the central bank represents the supply of money.

In the Home Economy, When "Money" Is a Liability of the Government