Assume that the banking system has total reserves of $200 billion. Additionally, assume that the Federal Reserve mandates that required reserves are 25% of checking deposits. Banks may not hold excess reserve and households have no currency. What is the money supply? Select one: a. $600 billion b. $450 billion c. $800 billion d. $300 billion

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
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Assume that the banking system has total reserves of
$200 billion. Additionally, assume that the Federal
Reserve mandates that required reserves are 25% of
checking deposits. Banks may not hold excess reserve
and households have no currency. What is the money
supply?
Select one:
a. $600 billion
b. $450 billion
c. $800 billion
d. $300 billion
Transcribed Image Text:Assume that the banking system has total reserves of $200 billion. Additionally, assume that the Federal Reserve mandates that required reserves are 25% of checking deposits. Banks may not hold excess reserve and households have no currency. What is the money supply? Select one: a. $600 billion b. $450 billion c. $800 billion d. $300 billion
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