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Economics

Answer the question below by assuming that the following conditions prevail in the banking system:

- Reserve requirements equal to %10 on demand deposits accounts

- Currency in circulation amount to $40 billion - Savings and Time deposits amount to $400 billion

- Demand deposits amount to $200 billion

- The Banking System is holding $20 billion in excess reserves

a. Calculate the M1 multiplier.

b. Calculate the M2 multiplier.

c. If the Fed purchases $2 billion of securities from the banking system, what would the potential change in the M-1 monetary aggregate be? Why is this a potential change and not a definite change?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91705597

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