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(Solved): In the economy, the following statistics describe the money supply: CU=$1000 billion RES=$75 billi ...
In the economy, the following statistics describe the money supply:
CU=$1000 billion
RES=$75 billion
DEP=$1,500 billion Given these data, calculate the amount of the monetary base:
BASE =9, billion Calculate the quantity of the money supply:
M=, billion Calculate the ratio of reserves to deposits:
res = (carry out to four decimals) Calculate the ratio of currency to deposits:
cu=, (carry out to four decimals) Calculate the money multiplier:
mm=(carry out to four decimals) Now, suppose a shock causes banks to change the amount of reserves they hold relative to deposits, so that res changes from 0.0500 to 0.0417 . Suppose that when this happens, both cu and BASE do not change. However, the change in res will affect
mm,M,CU,RES, and
DEP. Calculate the new value of the money multiplier:
mm=, (carry out to four decimals)
Please answer only the last question
