Knowee
Questions
Features
Study Tools

In the economy of Ozlandia, the monetary base is $500 billion. People hold 25% of their money in the form of currency and the remainder in bank deposits. Banks keep 15% of their deposits in reserve. Assume the velocity of money is constant.Based on the above information, answer the following questions.a. The currency-deposit ratio (cr) is .  (Note: Round your answer to two decimal places.)b. The money multiplier (m) is

Question

In the economy of Ozlandia, the monetary base is $500 billion. People hold 25% of their money in the form of currency and the remainder in bank deposits. Banks keep 15% of their deposits in reserve. Assume the velocity of money is constant.Based on the above information, answer the following questions.a. The currency-deposit ratio (cr) is .  (Note: Round your answer to two decimal places.)b. The money multiplier (m) is

...expand
🧐 Not the exact question you are looking for?Go ask a question

Solution

The currency-deposit ratio (cr) is the proportion of total money that people hold in the form of currency. In Ozlandia, people hold 25% of their money in the form of currency. Therefore, the currency-deposit ratio (cr) is 0.25 or 25%.

The money multiplier (m) is calculated using the formula:

m = (1 + cr) / (cr + rr)

where cr is the currency-deposit ratio and rr is the reserve-deposit ratio. In Ozlandia, the reserve-deposit ratio is 15% or 0.15.

So, the money multiplier (m) is:

m = (1 + 0.25) / (0.25 + 0.15) = 1.25 / 0.4 = 3.125

Therefore, the money multiplier (m) in Ozlandia is 3.125.

This problem has been solved

Similar Questions

If the monetary base of a country is $7,000. People hold half of their money in the form of currency, and commercial banks hold a quarter of their deposits in reserve. Context: long run, closed economy(use the econ 211 knowledge) (a)Compute the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply.

If there is an economy’s monetary base is $1000 m, and the reserve-deposit ratio (rr) is 0.35. suppose people hod 1/5 of their money as currency and deposit 4/5 at banks. Then what are the currency -deposit ratio and money supply?A.0.2   2180B.0.25   2270C. 0.8        1570D.0.25  454

In the economy of Panicia, the monetary base is $2000. People hold a third of their money in the form of currency (and thus two-thirds as bank deposits). Banks hold a third of their deposits in reserve. What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply?This is a multi answer question. You can select one or more options as the answer.A.the reserve-deposit ratio (rr)=1/3; the currency-deposit ratio (cr) =1/2; the money multiplier = 1.8.; the money supply = 3600.B.the reserve-deposit ratio (rr)=2/3; the currency-deposit ratio (cr) =1/2; the money multiplier = 1.8.; the money supply = 1800.C.the reserve-deposit ratio (rr)=1/3; the currency-deposit ratio (cr) =1/3; the money multiplier = 1.8.; the money supply = 3600.D.the reserve-deposit ratio (rr)=2/3; the currency-deposit ratio (cr) =1/3; the money multiplier = 1.8.; the money supply = 1800.

The currency-deposit ratio is 0.8 and the currency is $ 800 billion, and the reserve-deposit ratio is 0.2. what is monetary base?A.1000 billionB.1200 billionC.1500 billionD.800 billion

If the required reserve ratio is one-third, currency in circulation is $300 billion, checkable deposits are $900 billion, and there is no excess reserve, then the M1 money multiplier is A) 2.5. B) 2.8. C) 2.0. D) 0.67.

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.