In Econland, the monetary base is $1,000. People hold one-third of their money in the form of currency and two-thirds as bank deposits. Banks hold one-fourth of their deposits in reserves. a. What are the currency-deposit ration, the reserve-deposit ratio, the money multiplier, and the money supply? Show your calculation. b. One day, fear about the banking system strikes the population, and people now want to hold half of their money in the form of currency. If the central bank does nothing, what is the new money multiplier and the money supply? What happens to the money supply? c. Suppose instead of doing nothing, the central bank decides to conduct an open-market operation to keep the money supply at its original level, does it buy or sell government bonds? How much does the central bank needs to buy or sell? Show your calculation.

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Financial Statements

Financial statements (or financial reports) are the formal records of the financial activities that are undertaken by a firm. They are convenient instruments used for analyzing a company’s financial position and performance. Financial ratios are created with the help of the numerical values that are derived from the financial statements. They give meaningful information about the financial performance of the company.