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Question 3. An economy has a monetary base (B) of 2,000 $1 bills. Calculate the...

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Question 3. An economy has a monetary base (B) of 2,000 $1 bills. Calculate the money supply (M) in scenarios. (a) All money is held as demand deposits. Banks hold 100 percent of deposits as reserves. (b) All money is held as demand deposits. Banks hold 20 percent of deposits as reserves. What is the value of reserve ratio (rr), money multiplier (m) and total money supply (M)? Note: you do not need consider consumers' decision about how much cash keeping at hand. (c) Suppose consumers hold equal amounts of currency and demand deposits. Banks hold 20 percent of deposits as reserves. Other things being equal, what is the value of the new money multiplier (m') and total money supply (M)

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