Question

1.) In the economy of Robberia, the monetary base is $2,000. People hold half of their money in the form of currency (and thus half as bank deposits). Banks hold a quarter of their deposits in reserve. What are the reserve to deposit ratio? The currency to deposit ratio? The money multiplier? The money supply?

2.) In the economy of Robberia, the monetary base is $2,000. People hold half of their money in the form of currency (and thus half as bank deposits). Banks hold a quarter of their deposits in reserve. One day, a rash of street robberies strikes fear in the population, and people now want to hold only a fifth of their money in the form of currency. If the central bank does nothing, what is the new money supply? . In the face of this panic, the central bank wants to conduct an open-market operation to keep the money supply at its original level, does it buy or sell government bonds? . Calculate, in dollars, how much central bank needs to transact.

Answer 1

according to HOMEWORKLIB POLICY i am answering only first question

10) Monetary base = $2,000 let people have a amount of money then Currency = 2 Bank Deposits = x eusermes = IC Deposits) reserves I Co reserves to Deposit sako (R/D) 9 л 2 - - Currency to = x Deposite ratio (9 cii, money, multiferre ( +1% woneymu 6) - 3/(514) money multiplier 85 = 1.8

O money supply = Ciseney & Demand deposit money supply = x/ here/ money supply = 2000 /