Calculate the reserve-deposit ratio

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Reference no: EM133714935

Question: In the economy of Panicia, the monetary base is $1,000. People hold one-third of their money in the form of currency (and thus two-thirds as bank deposits). Banks hold one-fourth of their deposits in reserve.

Calculate the reserve-deposit ratio, the current-deposit ratio, the money multiplier, and the money supply.

reserve-deposit ratio = (answer should be a form of a fraction, e.g., x/y)
currency-deposit ratio = (answer should be a form of a fraction, e.g., x/y)
money multiplier =
money supply =$

One day, the Federal Deposit Insurance Corporation (FDIC) decided to raise the deposit insurance coverage limit in the case of bank failure, and people now want to hold one-fifth of their money in the form of currency. If the central bank does nothing, what is the new money supply?

Reference no: EM133714935

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