The Required Reserve Ratio Is 0

question 2

Short Answer

The required reserve ratio is 0.05, the level of deposits is $4000, the level of currency held by the public is $500, the level of excess reserves is $500, the level of money market funds is $1,000 and the level of time deposits is $3,000. If the monetary base falls by $100, find the change in M2.

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Definitions:

Fair Value

The estimated market value of an asset or liability, based on current prices in an open market.

Financial Statements

Formal records that outline the financial activities and condition of a business, including balance sheets, income statements, and cash flow statements.

Adjusted Trial Balance

A list of all account titles and balances after adjustments are made, used to verify the equality of debits and credits and prepare financial statements.

Consistency

An accounting principle that requires accounting methods to be applied in a similar manner from period to period.