This Exercise Is Based on the Following Simplified Model of the Determination

question 97

Short Answer

This exercise is based on the following simplified model of the determination of the money stock.
$\begin{array} { l } M = C + D \\C = 0.2 D \\R = 0.1 D \\H = R + C\end{array}$ ,

where M - money stock
C - currency in circulation
R - bank reserves
D - deposits of the public
H - high-powered money
If the money stock were $108 billion, what would bank reserves have to be

$____________billion

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Definitions:

Underwriters

Financial specialists who assess and undertake the risk of another party for a fee, often in the context of issuing insurance policies or investment securities.

Discount

A reduction in the price of goods or services usually to encourage sales or to reward specific groups of customers.

Premium

In finance, a premium refers to the amount by which the price of a financial asset or insurance policy exceeds its intrinsic or face value.

Recorded

The act of entering financial transactions into the accounting records of a company.