Question 3Part (a)Suppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank.Assume that the bank loans out the maximum amount it can, and people deposit alltheir money. What is the deposit multiplier? What is the total increase in deposits inthe banking system? What is the change in the money supply?Part (b)Graph the demand for and supply of Australian dollars for British Pound. Supposethe Reserve Bank of Australia decides to follow an appropriate monetary policy tocontain inflation. Show graphically and explain the effect of this policy on thedemand and supply of dollars and the resulting change in the exchange rate ofpounds for dollars.

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Suppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank. Assume that the bank loans out the maximum amount it can, and people deposit all their money. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in the money supply?

Suppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank. Assume that the bank loans out the maximum amount it can, and people deposit all their money. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in the money supply?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.2P

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