Suppose for each dollar of demand deposits the public holds $0.30 in currency. Suppose further that banks are required to hold required reserves equal to 0.12 of their demand deposits. If the monetary base is $5,000, determine the money supply (M). If the reserve requirement ratio on demand deposits increases to 0.15, how will your answer to section (a) be affected? If the public stops carrying currency, how will your answer to section (a) be affected? If the central bank sells $200 of government securities, how will your answer to section (a) be affected?
Suppose for each dollar of demand deposits the public holds $0.30 in currency. Suppose further that banks are required to hold required reserves equal to 0.12 of their demand deposits. If the monetary base is $5,000, determine the money supply (M). If the reserve requirement ratio on demand deposits increases to 0.15, how will your answer to section (a) be affected? If the public stops carrying currency, how will your answer to section (a) be affected? If the central bank sells $200 of government securities, how will your answer to section (a) be affected?
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 5QP
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Suppose for each dollar of demand deposits the public holds $0.30 in currency. Suppose further that banks are required to hold
- If the monetary base is $5,000, determine the money supply (M).
- If the reserve requirement ratio on demand deposits increases to 0.15, how will your answer to section (a) be affected?
- If the public stops carrying currency, how will your answer to section (a) be affected?
- If the central bank sells $200 of government securities, how will your answer to section (a) be affected?
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