Unformatted text preview: a. Find the value of the money multiplier. b. How does the money multiplier change when the public's cash/deposit ratio rises to = 0.3? What might cause such a change? c. Suppose (with = 0.2) the current money supply is M s = 1000. How much should the Bank increase high powered money to raise the money supply to M s = 1200? d. As an alternative the Bank seeks to increase the money supply by altering the reserve ratio, . What value should it set? Why might this not be effective? 4. Money in the Global Financial Crisis. a. Explain the mechanisms through which the GFC affected the UK money supply. b. What could the Bank of England do to reverse these effects?...
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.
- Spring '12