Question
If the currency in circulation is $50 billion, checkable deposits are $200 billion, the required reserve ratio is 5%, and excess reserves total $10 billion.
If the currency in circulation is $50 billion, checkable deposits are $200 billion, the required reserve ratio is 5%, and excess reserves total $10 billion. What are the money supply, monetary base, and money multiplier?
b. Assume that to improve the banking sector's stability, now the reserve ratio is raised to 15%.
How does this affect the money supply and money multiplier?
c. How does a rise in taxes influence the MP Curve and IS Curve? Please illustrate your answer using diagrams.
d. Suppose the long-run aggregate supply curve does not change, how does a rise in taxes influence the AD-AS equilibrium? Please illustrate your answer using a diagram.
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