The economy of Elmendyn contains 3,000 $1 bills.
1 answer:
Answer:
The correct answer is:
$3,000; $3,000; $3,000; $15,000; $5,454.54
Explanation:
An economy contains 3,000 bills of $1.
If people hold all the money as currency,
the quantity of money in the economy
= 3,000 $1
= $3,000
If people hold all money as demand deposits and maintain 100% reserves
The quantity of money is
= 100% of $3,000
= $3,000
If people hold equal amounts of currency and demand deposits, and the banks maintain a reserve ratio of 100%
The quantity of money
= $1,500 + 100% of $1,500
= $3,000
If people hold all money as demand deposits and banks maintain a reserve ratio of 20 percent
The money multiplier
=
= 5
The quantity of money
= 5 $3,000
= $15,000
If people hold equal amounts of currency and demand deposits and maintain a reserve ratio of 20%,
Currency = Demand deposits
10 ($3,000 - C) = D
$30,000 - 10C = D
We can also write this as,
$30,000 - 10D = D
$30,000 = 11D
D = 2,727.27
So the quantity of money will be
= $2,727.27 + $2,727.27
= $5,454.54
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check image file 4
