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Problem Set 3 – Some Answers FE405 - United States Naval ...

money is converted to a change in the money supply. Its size depends on the cash to deposit ratio and the reserve to deposit ratio as shown in the formula: κ = (1+cd)/(cd+rd). The central bank can first and foremost determine the money supply by creating high-powered money while keeping the banking multiplier in mind. Second, it can affect the

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