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3. Suppose Bank reserves are 120, the Currency held by the non-bank public is 200, and the currency-to-deposit ratio is .25. Find M, the money

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3. Suppose Bank reserves are 120, the Currency held by the non-bank public is 200, and the currency-to-deposit ratio is .25. Find M, the money supply. Find the value of the money multiplier. Let the Fed carry out open market purchases of 40, hoping, by increasing the base, to increase the money supply by 125 and thereby lower interest rates. However, instead of increasing, the money supply falls by 100. Suppose that banks haven't altered their desired reserve ratio. What explains this fall in M? What exactly has changed and by how much? Given the change you discovered above, how much more should the base be increased if the Fed is to carry out its goal

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