(Answered) Money multiplier and the quantity of money suppose that the

Management Studies

Money multiplier and the quantity of money: Suppose that the introduction and convenience of internet banking services reduces the public's demand for currency relative to deposits.

a) What happens to the money multiplier?

b) What would happen to the amount of money M and deposits D in the economy?

c) Suppose that banks' desired level of reserves relative to deposits remains unchanged. What happens to banks' demand for reserves R?

d) If the central bank wanted to keep the total quantity of money M from changing, what are two things that it could do?

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