Question: Central banks (banks of governments) hold about 35,000 tons of gold – one-third of the world’s supply. This is the equivalent of 17 years’ production. In the 1990s there was discussion about the central banks selling off their gold, since it is no longer tied to money supplies. Assuming they did sell it:
a. Demonstrate, using supply/demand analysis, the effect on the price of gold in the long run and the short run.

b. If you were an economist advising the central banks and you believed that selling off the gold made sense, would you advise them to do it quickly or slowly? Why?