Show all work for credit and carry all fractions to at least five decimal places. Work must be legible for credit.

Savings deposits = $2221.5b                                             Demand Deposits = $1880.6b

Required reserve ratio = 9%                                              Currency in circulation = $1100.0b

Vault Cash = $91.5b                                                        Household money market mutual fund = $1753.3b

Certificates of deposit (value< $100,000) = $2450.0b            Banking system deposits with the Fed = $208.2b

Household money market deposits accounts = $1588b           Certificates of deposit (value > $100,000) = $4827.6b

Institutional money market accounts = $3864.3b                  Treasury Bills = $458.3b

a. Calculate the MB.

b. Calculate m₁ as illustrated in practice problems. Interpret the multiplier.

c. Calculate M1 using the multiplier method.

d. Check using the definition of M1 method.

e. Repeat parts b-d for M2.

f. Suggest a specific action by the Federal Reserve if the macroeconomic models suggest that a $550 billion dollar increase in the M2 money supply is required to bring the economy back to a full employment equilibrium.

g. Recalculate the monetary base, multiplier, and money supply for M2 (using the equation approach) if households respond to new regulations by moving $80.6b from their checking accounts to household CD's and shift $240.7b from their currency holdings to their savings accounts.