Banking and Monetary Policy - End of Chapter Problem An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in scenarios a - d. Then answer part e. a. All money is held as currency b. All money is held as demand deposits. Banks are required to hold 100% of deposits as reserves. c. All money is held as demand deposits. Banks hold 20% of deposits as reserves. Money supply $ Money supply = $ Money supply = $ d. People hold equal amounts of currency and demand deposits. Banks hold 20% of deposits as reserves. Round to the nearest dollar. Money supply = $ e. The central bank wants to increase the money supply by 10%. In each of the above scenarios, by how much must it increase the monetary base? Monetary base increase = $

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Banking and Monetary Policy - End of Chapter Problem
An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in scenarios a - d. Then answer part e.
a. All money is held as currency
b. All money is held as demand deposits. Banks are required
to hold 100% of deposits as reserves.
c. All money is held as demand deposits. Banks hold 20% of
deposits as reserves.
Money supply $
Money supply = $
Money supply = $
d. People hold equal amounts of currency and demand
deposits. Banks hold 20% of deposits as reserves. Round to
the nearest dollar.
Money supply = $
e. The central bank wants to increase the money supply by
10%. In each of the above scenarios, by how much must it
increase the monetary base?
Monetary base increase = $
Transcribed Image Text:Banking and Monetary Policy - End of Chapter Problem An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in scenarios a - d. Then answer part e. a. All money is held as currency b. All money is held as demand deposits. Banks are required to hold 100% of deposits as reserves. c. All money is held as demand deposits. Banks hold 20% of deposits as reserves. Money supply $ Money supply = $ Money supply = $ d. People hold equal amounts of currency and demand deposits. Banks hold 20% of deposits as reserves. Round to the nearest dollar. Money supply = $ e. The central bank wants to increase the money supply by 10%. In each of the above scenarios, by how much must it increase the monetary base? Monetary base increase = $
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