In an economy, the demand for deposits is 150,000 goods and the non-borrowed part of the monetary base is $25,000. The reserve requirement is 11%. a) Assume no bank lending. Find the price level, the total money stock, the real value of investment by banks.
In an economy, the demand for deposits is 150,000 goods and the non-borrowed part of the monetary base is $25,000. The reserve requirement is 11%. a) Assume no bank lending. Find the price level, the total money stock, the real value of investment by banks.
Chapter1: Making Economics Decisions
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Transcribed Image Text:In an economy, the demand for deposits is 150,000 goods and the non-borrowed part of the
monetary base is $25,000. The reserve requirement is 11%.
a) Assume no bank lending. Find the price level, the total money stock, the real value of
investment by banks.
b) Assume bank lending is possible. Further, assume the central bank allows to meet 1/4 of
chartered banks reserve requirement by borrowing from the central bank. Find the price level,
the total money stock, the real value of investment by banks under this assumption.
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