Suppose you have the following information about an economy: Checkable bank deposits: $300,000 Currency in bank vaults: $20,000 Currency held by the public: $40,000 Reserves held at the central bank: $20,000 Traveler's Checks: $10,000 Savings Deposits: $500,000 Certificates of Deposit: $100,000
A) Calculate the Monetary Base, M1, and M2. For full credit, be sure to show all the steps you took to calculate them.
B) Suppose the reserve requirement for this economy is 0.15. Are there excess reserves? If so, how much? If not, why not? Explain in a sentence.
C) Suppose checkable deposits in this economy increase by $1,000. Calculate the impact on the money supply in this economy assuming there are no excess reserves and a reserve requirement of 0.15. For full credit, show your work.