The money supply is $12.5 million, currency held by the nonbank public is $2.5 million, and the reserve-deposit ratio is 0.25.(a)What is the quantity of bank deposits?(b)What is the quantity of bank reserves?(c)What is the quantity of the monetary base?(d)What is the money multiplier (give a number)?
What will be an ideal response?
| (a) | Since M = C + D, D = $10 million. |
| (b) | Since R = 0.25 × D, R = $2.5 million. |
| (c) | BASE = C + R = $5 million. |
| (d) | multiplier = M/BASE = 2.5. |
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