In the economy of lendland, the commecial banks have deposits of $500 billion. Their reserves are $50 billion. all reserves are in deposits with the central bank and the commecial banks hold no excess reserves. There is $110 billion in central bank notes outside the banks, and their are no coins.
a) What is the economy's monetary base?
b) What is the quantity of money in the economy?
c) Calculate the money multiplier?
d) Suppose the central bank of lendland undertakes an open market purchase of securities so that the monetary base increases by $5 billion. By how much will the quantity of money change?