# If people in Pantherville hold all money as currency what is the quantity of money?

[Briefly explain how you arrive Show more The economy of the Village of Pantherville contains 10000 \$1 bills. [Briefly explain how you arrived at each of your answers.] a) If people in Pantherville hold all money as currency what is the quantity of money? b) If people hold all money as demand deposits and the Bank of Pantherville maintains 100% reserves what is the quantity of money? c) If people hold equal amounts of currency and demand deposits and the Bank of Pantherville maintains 100% reserves what is the quantity of money? d) If people hold all money as demand deposits and the Bank of Pantherville maintains a reserve ratio of 10% what is the quantity of money? [Hint: What is the money multiplier with a reserve ratio of .1?] e) If people hold equal amounts of currency and demand deposits and the Bank of Pantherville maintains a reserve ratio of 10% what is the qualtity of money? [This is more challenging but some simple algebra can be of assistance. Consider the following equations: 1) M = C + D (quantity of money equals currency + deposits) 2) C = D (currency must equal demand deposits) 3) 10*(\$10000 C) = D (total demand deposits equals the money multiplier times available reserves. In this instance total available reserves are (10000 currency holdings) Substitute (3) into (2) and solve for C Then once you have C you can solve for M given that C must equal D.] Show less

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