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7. Suppose total reserve is 100, money multiplier is 2.5, reserve ratio is 0.1. Then currency equals money base is and money supply is 8. During the Great Depression, the U.S. economy experienced many bank runs, to the point where people became unwilling to keep their money in banks, preferring to hold on to their cash. We would expect that such a shift away from checkable deposits toward currency to , _(increase/decrease) the money multiplier.

7. Suppose total reserve is 100, money multiplier is 2.5, reserve ratio is 0.1. Then currency equals money base is and money supply is 8. During the Great Depression, the U.S. economy experienced many bank runs, to the point where people became unwilling to keep their money in banks, preferring to hold on to their cash. We would expect that such a shift away from checkable deposits toward currency to , _(increase/decrease) the money multiplier.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
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7. Suppose total reserve is 100, money multiplier is 2.5, reserve ratio is 0.1. Then currency equals money base is and money supply is 8. During the Great Depression, the U.S. economy experienced many bank runs, to the point where people became unwilling to keep their money in banks, preferring to hold on to their cash. We would expect that such a shift away from checkable deposits toward currency to _(increase/decrease) the money multiplier.
Transcribed Image Text:7. Suppose total reserve is 100, money multiplier is 2.5, reserve ratio is 0.1. Then currency equals money base is and money supply is 8. During the Great Depression, the U.S. economy experienced many bank runs, to the point where people became unwilling to keep their money in banks, preferring to hold on to their cash. We would expect that such a shift away from checkable deposits toward currency to _(increase/decrease) the money multiplier.
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