1(a). First, explain the concept of the money multiplier. Then from the information that the narrow money supply (M1) in a hypothetical Canadian economy [with a competitive banking system in which banks produce only demand deposits] is $1750 million,and the idle excess reserves drain coefficient (e) is 3%, the desired cash reserve ratio (r) for demand deposits is 8%, and the currency/deposit ratio (c) is 30%, apply the multiplier model discussed in class or chapter 15 of the textbook to determine and calculate:

(i). The equilibrium level of the monetary base (MB);

(ii) the equilibrium level of demand [chequable] deposits (D);

(iii) the total amount of cash reserves held by banks (BCR), the amount of currency (C) held by the non-bank public;

(iv) the amount of bank loans (BL) and ( v ) the values of the deposit multiplier (dm) and the money multiplier (mm).

Lastly, (vi) Use diagrams to ILLUSTRATE your answers, where necessary.

I would like to add stuff in regards to your comment... but this is how the question was asked to me