Suppose That in Mysore,the Reserve-Deposit Ratio Is Res = 0

question 89

Multiple Choice

Suppose that in Mysore,the reserve-deposit ratio is res = 0.5 - 2i,where i is the nominal interest rate.The currency-deposit ratio is 0.2 and the monetary base equals 100.The real quantity of money demanded is given by the money demand function L(Y,i) = 0.5Y - 10i,where Y is real output.Currently,the real interest rate is 5% and the economy expects an inflation rate of 5%.The reserve-deposit ratio equals

• A)0.1.
• B)0.2.
• C)0.3.
• D)0.4.

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