You serve as a staff economist for the Board of Governors of the Federal Reserve

Question

You serve as a staff economist for the Board of Governors of the Federal Reserve System and are given the following information about the current economic and monetary situation.


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Cash held by the public: $400 million
Discount rate: 5%
Total reserves: $1,000 million
Unemployment rate: 7.6%
Required reserve ratio: 20%
Rate of inflation: 1.1%
Transactions deposits: $5,000 million

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6.1. Which of the following statements accurately describes the monetary situation?

Explanation / Answer

000 x 20% = 200 million 200 million x 5% = 1000 million

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