In the economy of Robberia, the monetary base is $2050. People hold 50% of their money in the form of currency (and thus 50% as bank deposits). Banks hold 25% of their deposits in reserve.
a. What are the reserve-deposit ratio, the currency-deposit ratio, the money multiplier, and the money supply? b. One day, a rash of street robberies strikes fear in the population, and people now want to hold only 30.000% of their money in the form of currency. If the central bank does nothing, what is the new money supply?
