Consider the following financial structure for Chirnutengure Republic

Monetary Base = 50 million Kwacha.

Total Deposits = 60 million Kwacha

Currency Holding 45 million Kwacha

Total Reserves in the Banks = 5 million

Due to undesirable inflation in the country, Bank of Zambia has decided to reduce the Statutory required Reserve Ratio from 10% to 5%.

1. Use the information above to compute and determine the money multiplier. Determine the total money supply circulating in this economy.

1. With the coming in of New Government, it's been discovered that many people have been hoarding money to hedge themselves against uncertainties, Using your calculations in part 1 (i), determine the effects of such an action on the levels of money supply in the economy.