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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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