Assume that the currency-deposit ratio is 0.5, therequired reserve ratio is 0.1, and the excess reserves todeposit ratio is 0.15. If the monetary base is $2 trillion,fınd(a) the amount of currency in circulation in billions ofdollars(b) required reserves in billions of dollars(c) excess reserves in billions of dollars.

here we calculate the following terms by using the given data , so the calculation of the following…

Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find (a) the amount of currency in circulation in billions of dollars (b) required reserves in billions of dollars

Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find (a) the amount of currency in circulation in billions of dollars (b) required reserves in billions of dollars

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 1.2P

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Concept explainers

IS-LM-PC Analysis

The IS (Investment Saving), LM (Liquidity Preference- Money Supply), and PC (Philips Curve) is the model that looks at the dynamics of output and inflation. It takes into account the central bank policy decision to adjust the inflation and real interest rate in the economy. It enables the economist to weather to priorities between employment and inflation rate analyzing the model. It is a practice-driven approach adopted by economists worldwide.

IS-LM Analysis

The term IS stands for Investment, Savings, and LM stands for Liquidity Preference, Money Supply. Therefore, the term IS-LM model is known as Investment Savings – Liquidity preference money Supply. This model was introduced by a Keynesian macroeconomic theory which shows the relationship between the economic goods market and loanable funds market or money market. In other words, it shows how the market for real goods interacts with the financial markets to strike a balance between the interest rate and total output in the macroeconomy. This particular model is designed in the form of a graphical representation of the Keynesian economic theory principle. The output and money are the two important factors in an economy.

Question

Assume that the currency-deposit ratio is 0.5, the
required reserve ratio is 0.1, and the excess reserves to
deposit ratio is 0.15. If the monetary base is $2 trillion,
fınd
(a) the amount of currency in circulation in billions of
dollars
(b) required reserves in billions of dollars
(c) excess reserves in billions of dollars.

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