Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find (a) the amount of currency in circulation in billions of dollars; (b) required reserves in billions of dollars (c) excess reserves in billions of dollars.

Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find (a) the amount of currency in circulation in billions of dollars; (b) required reserves in billions of dollars (c) excess reserves in billions of dollars.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter12: Money, Banking And The Financial System

Section: Chapter Questions

Problem 12QP

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Question

Assume that the currency-deposit ratio is 0.5, the required reserve ratio is 0.1, and the excess reserves to deposit ratio is 0.15. If the monetary base is $2 trillion, find

(a) the amount of currency in circulation in billions of dollars;

(b) required reserves in billions of dollars

Definition Definition Minimum amount that a commercial bank must hold in liquid assets in order to fulfill central bank regulations.

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Please solve it as early as possible
If C represents the currency-deposit ratio and r the reserve deposit ratio specified by the central bank, then the monet multiplier can be expressed as (1+r)/(c+r) 1/(c+r) (1+c)/c(c+r) (1+c)/(c+r)