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)?
(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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