we assumed that banks hold only reserves and loans as assets for simplicity. Now suppose that...

we assumed that banks hold only reserves and loans as assets for simplicity. Now suppose that banks use x fraction of their deposits to buy treasuries. Derive the money multiplier as a function of x, currency-deposit ratio cdr, and actual reserve ratio ar. How does an increase in x affect money multiplier, monetary base, and money supply?

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Rahul Sunny answered 1 year ago

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