I am having trouble answering these two open response questions. Help is appreciated. In a country Panicia, the monetary base is $1,000.
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I am having trouble answering these two open response questions. Help is appreciated.


5. In a

country Panicia, the monetary base is $1,000. People hold a third of their money in the form of currency (and thus two-thirds as bank deposits). Banks hold a third of their deposits in reserve. What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier,

and the money supply?

 

 

 

6. Following question above, one day, fear about the banking system strikes the population, and people now want to hold half their money in the form of currency. If the central bank does nothing, what is the new money supply?

 

Top Answer

5) Reserve deposit ratio = 1/3 Currency deposit... View the full answer

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