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QUESTION FOUR a. If the currency in circulation is $50 billion, checkable deposits are $200 billion, the required reserve ratio is 5%, and excess reserves
QUESTION FOUR a. 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? (15 Marks) 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? (10 Marks) c. How does a rise in taxes influence the MP Curve and IS Curve? Please illustrate your answer using diagrams. (10 Marks) 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. (15 Marks) [TOTAL: 50 MARKS]
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