Which would have the greatest effect on the money supply: 100 deposited when the required reserve...
Which would have the greatest effect on the money supply: 100 deposited when the required
reserve ratio is 10% or 80 deposited when the ratio is 8%? If you can explain it with the money multiplier formula of C+D/C+ER+RR that would be great if possible.
Homework Answers
When the required reserve ratio is 10%, simple deposit multiplier is 1/10% = 10. Now increase in deposits is 100. Hence final increase in money supply is 100*10 = 1000
When the required reserve ratio is 8%, simple deposit multiplier is 1/8% = 12.50. Now increase in deposits is 80. Hence final increase in money supply is 80*12.50 = 1000
Therefore increase in money supply is same under both conditions. This happens because we are using only simple deposit multiplier, since we do not have information about excess reserves of the banking system.
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Which would have the greatest effect on the money supply: 100
deposited when the required
reserve...
Which would have the greatest effect on the money supply: 100 deposited when the required reserve...
Which would have the greatest effect on the money supply: 100 deposited when the required reserve ratio is 10% or 80 deposited when the ratio is 8%?
ed b. The money supply increases, decreases, remains constant): when the required reserve ratio increases. when...
ed b. The money supply increases, decreases, remains constant): when the required reserve ratio increases. when the discount rate decreases. when the Fed sells securities. when the currency drain ratio increases. when the excess reserve ratio decreases. c. d. e. The table below shows the balance sheet in millions of dollars) for three banks. a. Suppose the required reserve ratio is 5 percent. Fill in the table. Bank of East Los Angeles Assets Liabilities Deposit: RR: $120 ER: Bank of...
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit...
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit...
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit...
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
If the required reserve ratio is 100%, by how much can the money supply increase if...
If the required reserve ratio is 100%, by how much can the money supply increase if $1,000 in cash is taken from under your mattress and deposited in a bank? A. $1,000 B. $5,000 C. $0 D. $10,000 E. $4,000
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve...
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve System D) Senate Committee on Banking and Finance. 10. Ceteris paribus, if the Fed raised the required reserve ratio A) Banks could increase their lending B) The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. D) The size of the monetary multiplier would increase. 11. Money is created when A) Loans are made. Checks written on one bank...
8.The reserve requirement, open market operations, and the money supply
Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table.Reserve RequirementSimple Money MultiplierMoney Supply(Percent)(Dollars)25 10 A higher reserve requirement is associated with a money supply.Suppose the Federal Reserve wants to increase the money supply...
Assume a bank has to keep a 25% Reserve Ratio. If $100 is deposited at the...
Assume a bank has to keep a 25% Reserve Ratio. If $100 is deposited at the bank, how much can the bank lend out of that deposit? If the loan is deposited at another bank with a 25% Reserve Ratio, how much will be able to be lent then? If every loan was deposited, how much money would be created (added) to the money supply?
Suppose that r= required reserve ratio = 0.20 c = {C/D) = currency ratio = 0.30...
Suppose that r= required reserve ratio = 0.20 c = {C/D) = currency ratio = 0.30 e = {ER/D} = excess reserve ratio = 0.01 MB = the monetary base = $3,000 billion Given that the formula for the money multiplier is find the value for M, the money supply. The money supply is $ billion. (Round your response to the nearest whole number.)
ed b. The money supply increases, decreases, remains constant): when the required reserve ratio increases. when the discount rate decreases. when the Fed sells securities. when the currency drain ratio increases. when the excess reserve ratio decreases. c. d. e. The table below shows the balance sheet in millions of dollars) for three banks. a. Suppose the required reserve ratio is 5 percent. Fill in the table. Bank of East Los Angeles Assets Liabilities Deposit: RR: $120 ER: Bank of...
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve System D) Senate Committee on Banking and Finance. 10. Ceteris paribus, if the Fed raised the required reserve ratio A) Banks could increase their lending B) The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. D) The size of the monetary multiplier would increase. 11. Money is created when A) Loans are made. Checks written on one bank...
Suppose that r= required reserve ratio = 0.20 c = {C/D) = currency ratio = 0.30 e = {ER/D} = excess reserve ratio = 0.01 MB = the monetary base = $3,000 billion Given that the formula for the money multiplier is find the value for M, the money supply. The money supply is $ billion. (Round your response to the nearest whole number.)
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