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(vii) Now, suppose banks in this hypothetical economy hold borrowed reserves (BR), according to the following relation: BRIMB = 5[R - b]; in which, R
(vii) Now, suppose banks in this hypothetical economy hold borrowed reserves (BR), according to the following relation: BRIMB = 5[R - b]; in which, R and b are respectively the market interest rate and the bank rate {measured in fractional units)and MB is the initial value of the monetaryr base. If the bank rate is 2.5 per cent and the market rate of interest is 4 per cent, calculate the percentage changes in the values of borrowed reserves (BR) AND non-borrowed reserves {HER} after the implementation of the policy package
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