Consider the central bank balance sheet for the country of Riqueza. Riqueza current has $2,000 million escudos in its money supply, $1,300 million of which is backed b domestic government bonds; the rest is backed by foreign exchange reserves. Assum that Riqueza maintains a fixed exchange rate of 1 escudo per dollar, the foreign interest rate remains unchanged, and money demand takes the usual form, M/P L(i) Y Assume prices are sticky.
Show Riqueza's central bank balance sheet, assuming there are no private banks. What is the backing ratio?