1.Suppose the currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, excess reserves are $15 billion, and the desired reserves ratio is 10%.

a.Calculate the money supply (MS), the currency deposit ratio (c), the excess reserve ratio (e), and the money multiplier (m).

b.Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) are the same, calculate the monetary base (MB), and the money supply (MS).

c.Suppose the central bank conducts the same open market purchase as in part (b), except that banks choose to hold all of these proceeds as excess reserves rather than loan them out, due to fear of a financial crisis. Assuming that currency and deposits remain the same, calculate the amount of excess reserves (ER), the excess reserves ratio (e), the money supply (MS), and the money multiplier (m).