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What are the reserve-deposit ratio

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Reference no: EM132812964

Assume that the monetary base is $2,000. Peple hold a third of their money in the form of currency and deposit two thirds with banks. The banks hold a third of their deposits in reserve.

a) What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply?

b) What if people hold half of their money in the form of currency. How would your answers to a) change?

Reference no: EM132812964

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