a. In an economy, firms tend to hold 25% of output as inventory. If in a period 1, total output is 400 units, calculate the stock of inventory in that period. If production increases by 50% in the following period, calculate inventory investment over the two periods. b. The economy is also characterised by the following features; Total deposits = $250,000,Total currency in circulation = $45,000; and Total reserves = $25,000. Given the information above: Calculate the money multiplier. Calculate the money supply.
a. In an economy, firms tend to hold 25% of output as inventory. If in a period 1, total output is 400 units, calculate the stock of inventory in that period. If production increases by 50% in the following period, calculate inventory investment over the two periods. b. The economy is also characterised by the following features; Total deposits = $250,000,Total currency in circulation = $45,000; and Total reserves = $25,000. Given the information above: Calculate the money multiplier. Calculate the money supply.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
a. In an economy, firms tend to hold 25% of output as inventory.
-
If in a period 1, total output is 400 units, calculate the stock of inventory in that period.
-
If production increases by 50% in the following period, calculate inventory investment over the two periods.
b. The economy is also characterised by the following features;
Total deposits = $250,000,
Total currency in circulation = $45,000; and Total reserves = $25,000.
Given the information above:
-
Calculate the money multiplier.
-
Calculate the money supply.
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