# Macroeconomics of Middle Earth

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Fernanda Matos De Oliveira Welcome to Macroeconomics in Middle Earth! Part 2* Section 9 Treebeard runs the MENB (Middle Earth National Bank) with “ branches” over the Shire. Merry Brandybuck makes all a deposit in the Shire’MENB of \$100 from the loot he s brought back from his travels in Wilderland. 'One felt as if there was an enormous well behind them, filled up with ages of memory and long, slow steady thinking; but their surface was sparkling with the present: like sun shimmering on the outer leaves of a Page 1 of 59 1/30/13 *Quotes from The Lord of the Rings, or The Hobbit by JRR Tolkien. Nothing written in italics applies to the questions— s there just for Tolkien fun. Go forth and read!!! it’ Fernanda…show more content…
RR=0.2 Page 2 of 59 1/30/13 *Quotes from The Lord of the Rings, or The Hobbit by JRR Tolkien. Nothing written in italics applies to the questions— s there just for Tolkien fun. Go forth and read!!! it’ Fernanda Matos De Oliveira Total Reserves=\$500 Excess reserves=\$500-(0.2×500)=\$400 Maximum change to money supply=(1/0.2)×400=\$2000 d) What two assumptions are included in calculating the maximum change in the money supply in a)? Explain the difference between a) and c). Assumptions · Banks hold NO excess reserves · Individuals DON’ hold money T We would expect the maximum change to money supply to be higher in c than in a because of a higher reserve rate in c. Although the reserve rate is higher in b, the total reserves are high enough to make the maximum change to money supply to be the highest. THE MAIN DIFFERENCE IS A IS NEW TO MONEY SUPPLY, C IS NOT 'Of course we understand,' said Merry firmly. 'That is why we have decided to come. We know the Ring is no laughing matter; but we are going to do our best to help you against the Enemy.' Section 1 0 The Federal Council of Elrond (Fed) controls the banking system in Middle Earth. The Council is responsible for controlling the money supply and implementing monetary policy. Page 3 of 59 1/30/13 *Quotes from The Lord of the Rings, or The Hobbit by JRR Tolkien. Nothing written in italics applies to the questions— s there just for Tolkien fun. Go forth and read!!!