The private sector holds $40 billion in notes and coins. The banking system has deposits totaling $160 billion, against which they hold reserves of $10 billion. They currently keep $3 billion of their reserves in their tills or vaults to meet day-to-day withdrawals, and $7 billion at the Reserve Bank. The banks also own liquid government securities worth $6 billion.
a. Calculate the money supply.
b. How much is the money base?
c. What seems to be the desired currency to deposit ratio of its citizens?
d. What seems to be the bank’s ratio of reserves to deposits?
e. Calculate the money multiplier.
