Suppose that each of the economy’s 600 young agents has deposits worth 100 goods with a bank no matter what the rate of return.A. Assume that the reserve requirement is 10% and the monetary base is £3,000. Answer part B and C only! i) Calculate the total nominal money stock.ii) Find the value of a unit of fiat money.iii) What is the price of a good in units of fiat money?iv) How many goods would the government acquire if it increased the monetary base by 50%? Explain your answer. v) What is the real value of investments by banks? B. How would your answer to each question in part (a) change if the reserve requirement doubled to 20%? Explain your answer. C. Suppose the reserve requirement stays at 10% but banks voluntarily hold an extra 10% of deposits as fiat money reserves. Would your answers to part (b) change? Explain your answer.
Suppose that each of the economy’s 600 young agents has deposits worth 100 goods with a bank no matter what the
A. Assume that the reserve requirement is 10% and the monetary base is £3,000.
Answer part B and C only!
i) Calculate the total nominal money stock.
ii) Find the value of a unit of fiat money.
iii) What is the price of a good in units of fiat money?
iv) How many goods would the government acquire if it increased the monetary base by 50%? Explain your answer.
v) What is the real value of investments by banks?
B. How would your answer to each question in part (a) change if the reserve requirement
doubled to 20%? Explain your answer.
C. Suppose the reserve requirement stays at 10% but banks voluntarily hold an extra 10% of deposits as fiat money reserves. Would your answers to part (b) change?
Explain your answer.
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