Homework answers / question archive / Please use the table below to answer the following questions where: C = currency         D = demand deposits       ER = excess reserves         RR = required reserves       MB = monetary base         All numbers are in billions of $ US

Please use the table below to answer the following questions where: C = currency         D = demand deposits       ER = excess reserves         RR = required reserves       MB = monetary base         All numbers are in billions of $ US

Economics

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FOR ALL CALCULATIONS OF THE MONEY SUPPLY USE THE EXPRESSION THAT WE DERIVED: THE MONEY MULTIPLIER x THE MONETARY BASE. DO NOT USE THE SIMPLE C + D DEFINITION TO CALCULATE MONEY SUPPLY. IN THEORY THEY ARE THE SAME, EMPIRICALLY, DUE TO LACK OF COMPLETE DATA, THEY DIFFER SLIGHTLY.

a)  Calculate the money multiplier and the money supply for August of 2008 (2008-08-01)

b)  Calculate the money multiplier and the money supply for August of 2009 (2009-08-01).

c) Explain why

1) the money multiplier is so different and

2) why the monetary base is so different between these two periods.

d) Calculate what the money supply would have been if the Fed increased the monetary base as they did from August of 2008 to August of 2009 but the money multiplier remained at its value in August of 2008.