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a) Suppose that a country put a billion dollars into circulation, and the banking system has a reserve-deposit ratio of 10 per cent. What is the money supply in the country?
b) If the banks' desired reserve-deposit ratio is 5 per cent, find deposits and the money supply? If the total amount of currency is 2 billion dollars and the desired reserve-deposit ratio remains at 10 per cent, what is the money supply in the country at this point?
c) Discuss the results you found in part b)
d) Suppose that the people choose to hold a total of 0.5 billion dollars in the form of currency and to deposit the rest of their money in banks. Banks keep reserves equal to 10 per cent of deposits. What is the money supply in the country?
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