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5. Assume an economy's monetary base is $1,000 and that currency is zero, i.e., all money is held as deposits at different banks. Assume that
5. Assume an economy's monetary base is $1,000 and that currency is zero, i.e., all money is held as deposits at different banks. Assume that the reserve deposit ratio, TT, is 0.2 and that banks do not hold excess reserves. (21) How large is the money supply? (b) What are total reservcs at banks? (e) Suppose now that depositors withdraw money from their banks and keep it as cash. If the total amount of cash is now $500, what is the new money multiplier? What is the money supply now? How is it divided between currency and deposits? What are total reserves at banks
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