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28 Sep 2019
In the US in 2014, the Federal Reserve increased the monetary base by 350%. The result was an increase in the money supply by 100%.
a) What was the Money Multiplier in 2014?
b) If Americans have a currency ratio of 0.80, what is the desired reserve ratio being held by banks?
c) Presume this scenario is held constant through to today. Then, suddenly American banks drop their reserve ratio to 30%. Explain what impact this would have the rate of inflation.
In the US in 2014, the Federal Reserve increased the monetary base by 350%. The result was an increase in the money supply by 100%.
a) What was the Money Multiplier in 2014?
b) If Americans have a currency ratio of 0.80, what is the desired reserve ratio being held by banks?
c) Presume this scenario is held constant through to today. Then, suddenly American banks drop their reserve ratio to 30%. Explain what impact this would have the rate of inflation.
Divya SinghLv10
28 Sep 2019