Final answer:
The Canadian money multiplier is C) 0.89, calculated by adjusting the basic formula of the money multiplier for the currency drain and reserve ratios. For Australia, the monetary base is $84,887 million, after adjusting the M1 figure for both the currency drain and reserve ratios.
Thus, the correct option is C.
Step-by-step explanation:
The question is asking for the Canadian money multiplier, which is a measure of the maximum amount of money a banking system can create from each dollar of reserve. The formula for the money multiplier is 1 divided by the reserve ratio.
However, the presence of a currency drain should be taken into account when calculating the multiplier, which is done by adjusting the formula to 1 / (reserve ratio + currency drain ratio). In Canada, with an 11 percent currency drain and a 0.03 percent reserve ratio, the money multiplier will be 1 / (0.11 + 0.0003), which is roughly 8.94 or 0.89 when converting to a percentage. Therefore, the correct answer to the first question is C) 0.89.
For determining the monetary base in Australia, we use the definition of M1 (the quantity of money in circulation including cash and checking deposits) and adjust it for the currency drain and reserve ratios. In Australia, the formula used to find the monetary base would be: M1 / (1 + currency drain ratio) / (1 + reserve ratio).
Plugging in the values provided: $150 billion / (1 + 0.33) / (1 + 0.08), we find that the Australian monetary base is approximately $84.887 billion or $84,887 million. This figure rounds to the nearest million as typically presented in economic reports.