If banks hold no excess reserves, checkable deposits total $1.5 billion, currency totals $400 million, and the required reserve ratio is 10%, then the monetary base equals

Question

Quizplus · Accepted Answer

The monetary base is the sum of currency in circulation and reserves held by banks. Required reserves are 10% of checkable deposits, which is $150 million. Since there are no excess reserves, the total reserves are $150 million. Adding the currency ($400 million) gives a monetary base of $550 million.

If Banks Hold No Excess Reserves, Checkable Deposits Total $1