(a) Suppose the central bank decides to make Rs. 100,000 open market sale. If high powered money (H) = Rs. 500,000/-, required reserve ratio (rr) 0.20, excess reserve ratio (er) = 0.05 and currency deposit ratio (cd) = 0.25, what will be the total currency holdings of the public? (b) What factors might cause a bank to change its desired excess reserve ratio?

(a) Suppose the central bank decides to make Rs. 100,000 open market sale. If high powered money (H) = Rs. 500,000/-, required reserve ratio (rr) 0.20, excess reserve ratio (er) = 0.05 and currency deposit ratio (cd) = 0.25, what will be the total currency holdings of the public? (b) What factors might cause a bank to change its desired excess reserve ratio?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 3.4P

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