Suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is0.05, and the required reserve ratio is 0.10. Which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserves ratio?
Answer to relevant QuestionsIs the money-multiplier model still useful for policymakers? If not, why not? Compute the impact on the money multiplier of an increase in the currency-to-deposit ratio from 10 percent to 15 percent when the reserve requirement is 10 percent of deposits, and banks’ desired excess reserves are 3 ...Do you think the Federal Reserve successfully carried out its role as lender of last resort in the wake of the terrorist attacks on September 11, 2001? Why or why not? Suppose the Federal Reserve did not pay interest on excess reserves. How would the reserve demand curve differ from that in Figure? Go to the Web site of the Federal Reserve Board at www.federalreserve.gov and find the section describing monetary policy tools. Which unconventional tools employed during the financial crisis of 2007-2009 has the Fed ...
Post your question