You are given the following information: Bank deposits (D) 350  Currency-to-deposits ratio (c) 0.20  Required reserve ratio (rr) 0.15  Solve for the monetary base level (B) in this economy.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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  1. You are given the following information:

Bank deposits (D) 350 

Currency-to-deposits ratio (c) 0.20 

Required reserve ratio (rr) 0.15 

  1. Solve for the monetary base level (B) in this economy.
  2. Solve for the level of bank reserves (R) in this economy.
  3. Solve for the money supply level (M) in this economy.
  4. Suppose there is a sudden rise in the currency-to-deposits ratio, from the original level of 0.2 to a new level of 0.4. If everything else remains unchanged, find the level of monetary base needed to keep money supply fixed at the level you solved for in part c.
  5. Continue to consider c=0.4. Find the level of required reserve ratio needed to keep the monetary base and the money supply fixed at the level you solved or in parts a and c, respectively.
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