Suppose that liabilities of the Central Bank are 90% reserves and 10% currency, and currency is not held by banks. Furth

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899603
Joined: Mon Aug 02, 2021 8:13 am

Suppose that liabilities of the Central Bank are 90% reserves and 10% currency, and currency is not held by banks. Furth

Post by answerhappygod »

Suppose that liabilities of the Central Bank are 90% reserves
and 10% currency, and currency is not held by banks. Further, a 30%
reserve/deposit limit for banks exists, and households hold 10% of
their assets in currency, and the rest in deposits. A $1 increase
in central bank liabilities at the stated 90/10 ratio leads to what
$ increase in M2? [please answer the question NOT in %, but in
absolute numbers]
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Post Reply