Question :

Given the followinginformation:

Bank deposits (D) : 350

Reserve Requirement Ratio (rrr) : 0.15

Currency-to-deposit ratio (c) : 0.20

In each case make the calculation and explain your answer.

a.What is the level of bank reserves (R) in this economy?

b.What is the monetary base level (B) inthis economy?

c.What is money supply(M) inthis economy?

d.Suppose there is a rise in c from the original level 0.20 to 0.40. If everything else remain unchanged find the level of monetary base needed to keep money supply fixed at the original level (the level you solved in part c.)?

e.Find the level of rrr that is needed, with c=0.40, to keep the monetarybaseand the money supply fixed in parts band c.