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?
Question
Solution 1
The monetary base (B) is the sum of currency (C) and reserves (R). Reserves can be calculated as a fraction of deposits (D) based on the reserve-deposit ratio (rr), and currency can be calculated as a fraction of deposits based on the currency-deposit ratio (cr).
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