Question

3. An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in...

3. An economy has a monetary base of 1,000 $1 bills. Calculate the money supply in scenarios a - d. Then answer part e.

a. All money is held as currency

Money Supply = $

b. All money is held as demand deposits. Banks are required to hold 100% of deposits as reserves.

Money Supply = $

c. All money is held as demand deposits. Banks hold 20% of deposits as reserves.

Money Supply = $

d. People hold equal amounts of currency and demand deposits. Banks hold 20% of deposits as reserves. Round to the nearest dollar.

Money Supply = $

e. The central bank decides it should increase the money supply by 10%. By how much should it increase the monetary base to accomplish this goal in each scenario?

Monetary Base Increase = $

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