In the economy of Panicia, the monetary base is $3850. People hold 40% of their money...

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In the economy of Panicia, the monetary base is $3850. People hold 40% of their money in the form of currency, 60% as bank deposits. Banks hold 10% of their deposits in reserve. (a) What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply? (b) 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? (c) If, in the face of this panic, the central bank wants to conduct an open-market operation to keep the money supply at its original level, does it buy or sell government bonds? Calculate, in dollars, how much the central bank needs to transact In the economy of Panicia, the monetary base is $3850. People hold 40% of their money in the form of currency, 60% as bank deposits. Banks hold 10% of their deposits in reserve. (a) What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply? (b) 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? (c) If, in the face of this panic, the central bank wants to conduct an open-market operation to keep the money supply at its original level, does it buy or sell government bonds? Calculate, in dollars, how much the central bank needs to transact

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Ansuer The monetary Base B is 3850People hold 40 f their moncy in the form of urre... View the full answer