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Question 3 a. Explain why banks do not hold 100 percent reserves. What is the relationship between the amount of reserves banks hold and the
Question 3 a. Explain why banks do not hold 100 percent reserves. What is the relationship between the amount of reserves banks hold and the amount of money that the banking system creates? (6 marks) b. What are the three major functions of money? Discuss how each of these functions be affected by inflation. (9 marks) c. What assumptions are necessary to argue that the quantity equation of money implies that increases in the money supply lead to proportional increases in the general price level? (5 marks) d. "If prices change in a way that leaves the overall price level unchanged, then no one is made better or worse off." Explain whether this statement is true, false or uncertain
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