a)In December 2021, currency held by individuals and businesses was $49 billion; current deposits at banks were $228 billion; other deposits at banks, building societies and credit unions were $1,115 billion;

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Question (12 marks)

a. In December 2021, currency held by individuals and businesses was $49 billion; current deposits at banks were $228 billion; other deposits at banks, building societies and credit unions were $1,115 billion; and deposits at other financial institutions (NBFIs) were $26 Calculate Ml, M3 and broad money in December 2021. (4 marks)

b. Suppose that you deposit $50 000 in currency into your savings account at ABC Bank. Assume that the bank's reserve ratio is 0.2. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in the money supply? (4 marks)

c. Explain how an increase in government spending, ceteris paribus, affects the equilibrium interest rate and the equilibrium quantity of loanable funds in the market for loanable funds. (4 marks)

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