Question
9.4. Suppose the central bank sets the reserve requirement ratio at 5 percent.The maximum the central bank is willing to lend is 25 percent of
9.4. Suppose the central bank sets the reserve requirement ratio at 5 percent.The maximum the central bank is willing to lend is 25 percent of required reserves, charging the gross real return of 1 on discount window loans. We assume the gross real return on fiat money is 1.02 and the gross real return on capital is 1.08.
a. What is the gross real return on deposits?
b. If the supply of fiat money is $10,000, what is the quantity of M1 in this economy?
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Business Statistics For Contemporary Decision Making
Authors: Ken Black
9th edition
978-1-119-3208, 9781119334781, 1119334780, 1119320895, 978-1119320890
