Question

1. The table below shows data on the behavior of the money supply during the onset of the Great Depression. Fill in the empty
2. A bank has the following entries on its balance sheet, but some intern lost track of which side they should be entered on:
3. Using Okuns law, fill in the four pieces of missing data in the table below. Year 2012 2013 2014 2015 Real GDP ($ billion
0 0
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Answer #1


Question 1

(a)

Calculate the monetary base in August 1929 -

Monetary base = Reserves in August 1929 + Currency in August 1929

Monetary base = 3.2 + 3.9 = 7.1

The Monetary base in August 1929 was 7.1

(b)

Calculate the money multiplier in August 1929 -

Money multiplier = Money supply in August 1929/Monetary base in August 1929

Money multiplier = 26.5/7.1

Money multiplier = 3.73

The money multiplier in August 1929 was 3.73

(c)

Calculate the Reserve-deposit ratio in August 1929 -

Reserve-deposit ratio = Reserves in August 1929/Deposits in August 1929

Reserve-deposit ratio = 3.2/22.6

Reserve-deposit ratio = 0.14

The reserve-deposit ratio in August 1929 was 0.14.

(d)

Calculate the currency-deposit ratio in August 1929 -

Currency-deposit ratio = Currency in August 1929/Deposits in August 1929

Currency-deposit ratio = 3.9/22.6

Currency-deposit ratio = 0.17

The currency-deposit ratio in August 1929 was 0.17

(e)

Calculate the deposits in March 1933 -

Deposits = Money supply in March 1933 - Currency in March 1933

Deposits = 19 - 5.5

Deposits = 13.5

The deposits in March 1933 was 13.5

(f)

Calculate the money multiplier in March 1933 -

Money multiplier = Money supply in March 1933/Monetary base in March 1933

Money multiplier = 19/8.4

Money multiplier = 2.26

The money multiplier in March 1933 was 2.26

(g)

Calculate the Reserve-deposit ratio in March 1933 -

Reserve-deposit ratio = Reserves in March 1933/Deposits in March 1933

Reserve-deposit ratio = 2.9/13.5

Reserve-deposit ratio = 0.21

The Reserve-deposit ratio in March 1933 was 0.21

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