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In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.

What are the money supply, the monetary base, and the money multiplier?

Money Supply =

Money Multiplier =

Monetary Base =

Review text pages 93-94 for a discussion of the money multiplier model and the determinants of the money supply.
Review text pages 93-94 for a discussion of the money multiplier model and the determinants of the money supply.
WIO_Mankiw_Chapter04_Question04_01
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      In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.

      Assume that Orcbank is a simple bank: it takes in deposits, makes loans, and has no capital. Show Orbank’s balance sheet. What value of loans does the bank have outstanding?

      Orcbank
      Assets Liabilities
      Reserves $2,000 Deposits $10,000
      Loans ?
      Total $10,000 Total $10,000

      Loans = $

      Review text Section 4-2 for discussion of bank balance sheets.
      Review text Section 4-2 for discussion of bank balance sheets.
      WIO_Mankiw_Chapter04_Question04_02
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          In the nation of Orcam, people hold $2,000 of currency and $10,000 of demand deposits in the only bank, Orcbank. The reserve–deposit ratio is 0.2.

          Orcam’s central bank wants to reduce the money supply by 10 percent. Should it buy or sell government bonds in open-market operations? Assuming no change in the money multiplier, calculate, in dollars, how much central bank needs to transact.

          Orcam’s Central Bank should buy $ of bonds.

          Review text pages 93-96 for a discussion of how a central bank affects the money supply through changes in the monetary base.
          Review text pages 93-96 for a discussion of how a central bank affects the money supply through changes in the monetary base.
          WIO_Mankiw_Chapter04_Question04_03
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