Explain why this following statement is true or false? d) Decreasing inflation rate and increasing purchasing power are caused by too many amount of money in circulation. e) If Bank’s reserve ratio is 30%, then an addition of $900 of new reserves will create $1000 of new deposits in the banking system. (Show with the calculation) f) The money supply will increasing if the bank has a reserve ratio of 100% while with a reserve ratio less than 100% and lends the remaining deposits, the money supply is remain unchanged.

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A:

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A:

Q: 8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not…

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A: Formula to calculate money multiplier:-                                                    k=1rr…

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A:

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A: Money multiplier can be calculated by using the following formula.

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