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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 ```

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