Suppose the Reserve-Deposit Ratio Is Res = 0

question 67

Essay

Suppose 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 more 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%. Assume the price level P is equal to 1.
a. Calculate the money multiplier.
b. Calculate the reserve-deposit ratio.
c. Calculate the money supply.
d. Calculate the value of output Y that clears the asset market.

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Definitions:

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A neurotransmitter and hormone involved in the body's fight or flight response, playing a key role in regulating heart rate, blood pressure, and sleep cycles.

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