1. Suppose that banks are required to hold reserves equal to at least 8 per cent of their deposits and hold no excess reserves. Also suppose that desired holdings of currency by the non-bank public are 3 per cent of deposits. Calculate the following using the money multiplier model set out in the lectures (all answers to 2 decimal places):
   1. The simple deposit multiplier
   2. The money multiplier
   3. Explain why the money multiplier is less than the simple deposit multiplier
   4. What is the effect on the total money supply if reserves are increased by $75m?
2. Suppose the total money supply is $200bn, and the parameters r and c are the same as in the previous question. Calculate the following (in $bn, to two decimal places):
   1. The monetary base
   2. The stock of currency held by the non-bank public
   3. Bank reserves
   4. If the currency ratio doubles as a result of economic uncertainty and the central bank keeps the monetary base unchanged, what is the effect on the total money supply?