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What happens to the money multiplier

Assignment Help Macroeconomics
Reference no: EM1394408

In the overview, it is assumed that the public holds .40 of each dollar and that the Fed sets the reserve ratio at .10.

What happens to the money multiplier if, due to the economy, the public holds .50 cents on the dollar and the Fed changes the reserve rate at .15?

Assuming the same monetary base, what happens to the M1 stock of money? If the Fed wants to keep the stock of money the same, what do they need to set the monetary base to? What does this mean? How will the Fed do this?

Reference no: EM1394408

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