Answer each part of Exercise 9.1 assuming that the central bank allows banks to borrow up to one-half of required reserves at a net interest rate of 8 percent.

Data from Exercise 9.1

Consider an economy with a constant population in which people wish to hold bank checking deposits worth a total of 5,000 goods in every period. The economy has a total endowment of 10,000 goods in each period. There is a total stock of un intermediated capital of 1,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits at banks are subject to a reserve requirement of 20 percent. The net real rate of return on capital is 10 percent per period. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. Individuals do not hold capital. The fiat money stock (monetary base) is $2,000 in every period. Calculate values for the following variables:

(a) The price of a good (in dollars).
(b) The gross real rate of return on deposits that will be offered by banks in a competitive economy.
(c) The total nominal money stock M1.
(d) The money multiplier.
(e) The total capital stock.
(f) Real GDP.