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Econ 31402
Fall 2009
Problem Set 10
Due December 2
nd
(on lecture time)
Reading assignments: Chapter 14 and 15
1. Suppose that in Mysore, the reservedeposit ratio is
res
= 0
:
5
2
i
, where
i
is the
nominal interest rate. The currencydeposit ratio is
0
:
2
and the monetary base equals
100
. The real quantity of money demanded is given by the money demand function
L
(
Y; i
) = 0
:
5
Y
10
i
, where
Y
is real output. Currently, the real interest rate is
5%
5%
. Assume the the price level
P
is equal
to
1
.
(a) Calculate the money multiplier.
(b) Calculate the reservedepostit ratio.
(c) Calculate the money supply.
(d) Calculate the value of output
Y
that clears the asset market
:
(a) Describe the di/erence between the primary credit discount rate and the secondary
credit discount rate, including who can borrow at which rate and how such lending
is managed by the Fed.
(b) Suppose the Fed has just learned that some foreign economies are headed for
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 Spring '07
 MBIEKOP
 Macroeconomics

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