Assess if the statement below is TRUE (always correct), FALSE (always wrong) or UNCLEAR (meaning correct under some circumstances, wrong under other circumstances to be explicitly defined). In 4 or 5 sentences, provide an explanationand examples/ illustration of why this is the case. Without an explanation or with an explanation that is off topic or with an explanation that shows serious confusion and misunderstanding, you will receive 0 marks, even if your conclusion was correct. Your answers must be entirely in words with no balance sheet, no diagram and no equations. The answer must reflect the content of the course and cannot use an outside source. Using copy/paste is strictly forbidden.When an ADI invests in a financial instrument issued by another ADI the stock of private money and the stock of central bank money are not affected.
Question
Assess if the statement below is TRUE (always correct), FALSE (always wrong) or UNCLEAR (meaning correct under some circumstances, wrong under other circumstances to be explicitly defined). In 4 or 5 sentences, provide an explanationand examples/ illustration of why this is the case. Without an explanation or with an explanation that is off topic or with an explanation that shows serious confusion and misunderstanding, you will receive 0 marks, even if your conclusion was correct. Your answers must be entirely in words with no balance sheet, no diagram and no equations. The answer must reflect the content of the course and cannot use an outside source. Using copy/paste is strictly forbidden.When an ADI invests in a financial instrument issued by another ADI the stock of private money and the stock of central bank money are not affected.
Solution
The statement is UNCLEAR. It is correct under some circumstances and wrong under others.
When an Authorized Deposit-taking Institution (ADI) invests in a financial instrument issued by another ADI, it pays for the instrument with its reserves at the central bank. This reduces its reserves (central bank money) but increases the reserves of the issuing ADI. So, the total stock of central bank money remains unchanged, just its distribution among ADIs changes.
However, the effect on the stock of private money (deposits in the ADIs) depends on how the ADIs adjust their balance sheets. If the purchasing ADI reduces its loans or the issuing ADI increases its loans, the stock of private money will decrease or increase respectively. But if they adjust other items on their balance sheets, the stock of private money may remain unchanged.
For example, if the purchasing ADI reduces its holdings of other assets or increases its liabilities other than deposits, or if the issuing ADI does the opposite, the stock of private money will not be affected. So, whether the stock of private money is affected or not depends on the specific actions of the ADIs.
Similar Questions
Task 3 - Do I demonstrate understanding?Read the statements below.Identify whether the statements are true of false giving a reason for your answerTrue/ False ReasonABCDEF
How would you improve this course?Your answer
carries 1 mark for the correct answer.If there is any missing data in either questions or options as well as wrong options, students need to attempt that question in order to claim the marks for that question.
In case of technical difficulty, problems in understanding of what is expected from you, general questions, etc., don't hesitate to contact the course team! Please post your message in the discussion thread below.
Using proper English and writing in full sentences, FIRST, construct a good argument with AT LEAST TEN (10) statements, including AT LEAST FOUR (4) true premises, that lead to your conclusion on the following topic:AGREE OR DISAGREE with this proposal, and construct your argument with good reasons to support your conclusion:“A $300-per-course levy should be added to the tuition fee of every ICM course, to cover the cost of all textbooks, workbooks, lab fees and photo-copying.”THEN, SECOND, copy this argument, underlining the indicator words, numbering all the statements (crossing out sentences that are not statements), and then crossing out the statements that are not premises or conclusions. This should leave only the sentences that are to be included in your argument diagram.THEN, THIRD, ON A SEPARATE PAGE, DIAGRAM your answer according to the method you learned in Chapter 3.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.