if money supply = 1000 and currency held by the public equals bank reserves; the required...

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if money supply = 1000 and currency held by the public equals bank reserves; the required...

if money supply = 1000 and currency held by the public equals bank reserves; the required reserve ratio is 0,25. Find currency held by the public and bank reserves

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Answer 1

Answer #1

Let currency with public and bank reserve be X. Then money supply= p(currency + bank reserve)/required reserve ratio

1000=X+X/0.25

1000=2X/0.25

1000=8X

X=125

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Answer 2

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