(Answered) Assume that an economy in whichnbspallnbspdeposits issued

Economics

Assume that an economy, in which all deposits issued by commercial banks are demand deposits, is characterized by the following information:

Ratio of currency to demand deposits: 0.20

Required reserve ratio (ratio of required reserves to demand deposits): 0.10

Excess reserve ratio (ratio of excess reserves to demand deposits): 0.05

Total monetary base: $100 billion

Calculate the values of the M1 multiplier and of the total stock of M1.

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