PS10 - Econ 3140-2 Fall 2009 Problem Set 10 Due December...

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Econ 3140-2 Fall 2009 Problem Set 10 Due December 2 nd (on lecture time) Reading assignments: Chapter 14 and 15 1. Suppose that in Mysore, the reserve-deposit ratio is res = 0 : 5 2 i , where i is the nominal interest rate. The currency-deposit 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 reserve-depostit 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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PS10 - Econ 3140-2 Fall 2009 Problem Set 10 Due December...

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