An economy has a monetary base of ten thousand $20 bills. Calculate the money supply for each scenario, and then answer part e.a. All the money is held in currency.
b. All of the money is held as demand deposits. Banks hold one hundred percent of deposits as reserves.
c. All of the money is held as demand deposits. Banks hold two percent of deposits as reserves.
d. People hold equal amounts of currency and demand deposits. Banks hold two percent of deposits as reserves.
e. The central bank decides to increase the money supply by five percent. In each of the above four scenarios, how much should it increase the monetary base?