In the economy, the following statistics describe the money supply
CU = $1000 billion
RES = $150 billion
DEP = $1,500 billion
Given these data, calculate the amount of the monetary base
BASE = $1150 billion
Calculate the quantity of the money supply
M = $2500 billion
Calculate the ratio of reserves to deposits
res = 0.1000 (carry out to four decimals)
Calculate the ratio of currency to deposits.
cu = 0.0667 (carry out to four decimals)
Calculate the money multiplier
mm = 2.1739 (carry out to four decimals)
Now, suppose a shock causes banks to change the amount of reserves they hold relative to deposits, so that res changes from 0.1000 to 0.1200.
Suppose that when this happens, both cu and BASE do not change. However, the change in res will affect mm, M, CU, RES, and DEP
Calculate the new value of the money multiplier
mm = (carry out to four decimals)