1. Consider the following model.The banking industry holds one kind of deposit, a checking deposit. The...

 

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1. Consider the following model.The banking industry holds one kind of deposit, a checking deposit. The money supply is defined to be currency in the hands of the public (C) plus deposits (D). The monetary base is currency in the hands of the public plus reserves (R) in the banking industry. Suppose the currency to deposit ratio is 0.15. Suppose the reserves to deposit ratio is 0.20. (a) (2pts) What is the money multiplier for this economy? (b) (2pts) Describe an open market operation that would cause the money supply to ultimately rise by 60 million dollars. (c) (2pts) If the central bank were to sell 10 million dollars of government Treasury bills, what exactly would ultimately happen to the money supply? 1. Consider the following model.The banking industry holds one kind of deposit, a checking deposit. The money supply is defined to be currency in the hands of the public (C) plus deposits (D). The monetary base is currency in the hands of the public plus reserves (R) in the banking industry. Suppose the currency to deposit ratio is 0.15. Suppose the reserves to deposit ratio is 0.20. (a) (2pts) What is the money multiplier for this economy? (b) (2pts) Describe an open market operation that would cause the money supply to ultimately rise by 60 million dollars. (c) (2pts) If the central bank were to sell 10 million dollars of government Treasury bills, what exactly would ultimately happen to the money supply?

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a The money multiplier can be calculated using the formula Money Multiplier 1 Reserve Ratio Given th... View the full answer