Final answer:
Using the money multiplier concept, the currency deposit ratio (cr) was calculated to be 4.5 with the given monetary base and reserve deposit ratio. Changing the currency deposit ratio to 0.2 resulted in a new money supply of $2000 billion when the reserve deposit ratio and monetary base remained the same.
Step-by-step explanation:
The student's question pertains to determining the currency deposit ratio and the impact of its change on the money supply in the context of the monetary base and the reserve deposit ratio. The given values are a monetary base (B) of $600 billion, money supply of $3300 billion, and a reserve deposit ratio (rr) of 0.1. To find the currency deposit ratio (cr), we use the money multiplier concept and the relationship between the monetary base, the reserve deposit ratio, and the money supply.
The formula for the cr when the reserve ratio (rr) and the monetary base (B) are known, along with the initial money supply (M), is:
M = B × (cr + 1) / (cr + rr)
Plugging in the values, we get:
3300 = 600 × (cr + 1) / (cr + 0.1)
Solving for cr, we find that cr is 4.5.
If the currency deposit ratio (cr) changes to 0.2 while the reserve deposit ratio (rr) and the monetary base (B) remain unchanged, the new money supply (M) can be calculated as:
M = B × (cr + 1) / (cr + rr)
M = 600 × (0.2 + 1) / (0.2 + 0.1)
Which results in a new money supply of $2000 billion.