Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, excess reserves are $15 billion, and the desired reserve ratio is 10% Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) are the same, what do you predict will be the effect on the money supply? Calculate new the money supply.
Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, excess reserves are $15 billion, and the desired reserve ratio is 10% Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) are the same, what do you predict will be the effect on the money supply? Calculate new the money supply.
Chapter15: Money Creation
Section: Chapter Questions
Problem 17SQ
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Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion,
- Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier.
- Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) are the same, what do you predict will be the effect on the money supply? Calculate new the money supply.
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