Homework Answers
Option 3
Explanation: When people hold more cash, it lowers spending. Also, increased excess reserve by banks lowers money creation. So, these lower the multiplier.
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Help Serveis When would we expect the value of the money multiplier to be smaller? Multiple...
The initial money market supply and demand in an economy is given by: Money supply: Ms...
The initial money market supply and demand in an economy is given by: Money supply: Ms = $100,000 Money demand: MD 600,000 – 4,000,000r = The following table shows the changes in deposits, reserves and loans of five banks following a $40,000 initial deposit in Best Bank, after the Fed made an open market operation purchase of securities from Best Bank. Only the five biggest banks are shown here, but there are many other banks in the economy. Assume that...
4- When the Fed conducts open-market sales, a. it sells Treasury securities, which decreases the money...
4- When the Fed conducts open-market sales, a. it sells Treasury securities, which decreases the money supply. b. it lends money to member banks, which decreases the money supply. c. it borrows from member banks, which increases the money supply. d. it sells Treasury securities, which increases the money supply. 5- When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program such as new...
8. The monetary multiplier Suppose that Ginny makes a new cash deposit of $120,000 at her...
8. The monetary multiplier Suppose that Ginny makes a new cash deposit of $120,000 at her bank. Suppose that the bank is required only to keep new cash reserves equal to 20%. Then the maximum amount Ginny's deposit will money supply is $ the Which of the following assumptions must hold to ensure that the money creation process initiated by Ginny's deposit reaches its potential? Check all that apply O All banks in the banking system lend all of their...
1. Suppose that currency in circulation is $600 billion, the amount of checkable deposits is $900...
1. Suppose that currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, required reserve on checkable deposits is 10% and excess reserves are $15 billion. a. Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios, you calculated in...
Question 1. (15 points) Suppose that currency in circulation is $600 billion, the amount of chequable...
Question 1. (15 points) Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, and excess reserves are $15 billion and the desired reserve ratio is 10%. a. Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. b. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the...
22. According to the authors of the text, money is a force multiplier in that it:...
22. According to the authors of the text, money is a force multiplier in that it: a. eliminated the disadvantage that arises from the double coincidence of wants. b. reduces the number of prices. c. provides valuable role for gold in a money economy. d. All of the above. e. Only A and B of the above 38. Carmen has $2000 in cash that she had been holding onto for a while and has decided to deposit this money into...
50) The Federal Open Market Committee A) is the main policy-making organ of the Federal Reserve....
50) The Federal Open Market Committee A) is the main policy-making organ of the Federal Reserve. B) is headed by the president of the New York Federal Reserve Bank. C) consists of the Fed chairman and the 12 regional bank presidents. D) meets every week to review the state of the economy 50) 51) When the quantity of money demanded is greater than the quantity of moneyupplied, people 1) bonds and the interest rate A) buy; falls B) sell; falls...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
Since 2008, the money supply has almost quadrupled, going from $1.4t to $5.3t. At the same...
Since 2008, the money supply has almost quadrupled, going from
$1.4t to $5.3t. At the same time, the Real GDP (the actual amount
of goods and services produced by the economy has increased by a
modest 23%, equivalent to an average growth of just under 2% per
year.
We expect that a large increase in the money supply without a
corresponding increase in the Real GDP would cause a very large
increase in inflation. In fact, since 2008 inflation has...
ECON2313 hw4 2019b View Review Mailings yout References AatbCeDE AaßbCcD: AalbCcDd E AaBb Aasb AaltbCeDdE Ap 4 A Aa...
ECON2313 hw4 2019b View Review Mailings yout References AatbCeDE AaßbCcD: AalbCcDd E AaBb Aasb AaltbCeDdE Ap 4 A Aa Su Tele Heading 21 Headng 1 No Spacing Nerml A A Part II. Short Answer Questions 1. Explain how each of the following events affects the monetary base, the money multiplier, and the money supply. a. The Fed increases the interest rate it pays banks for holding reserves. When the Fed increases the interest rate, it pays banks to hold reserves....
The initial money market supply and demand in an economy is given by: Money supply: Ms = $100,000 Money demand: MD 600,000 – 4,000,000r = The following table shows the changes in deposits, reserves and loans of five banks following a $40,000 initial deposit in Best Bank, after the Fed made an open market operation purchase of securities from Best Bank. Only the five biggest banks are shown here, but there are many other banks in the economy. Assume that...
8. The monetary multiplier Suppose that Ginny makes a new cash deposit of $120,000 at her bank. Suppose that the bank is required only to keep new cash reserves equal to 20%. Then the maximum amount Ginny's deposit will money supply is $ the Which of the following assumptions must hold to ensure that the money creation process initiated by Ginny's deposit reaches its potential? Check all that apply O All banks in the banking system lend all of their...
1. Suppose that currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, required reserve on checkable deposits is 10% and excess reserves are $15 billion. a. Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the ratios, you calculated in...
Question 1. (15 points) Suppose that currency in circulation is $600 billion, the amount of chequable deposits is $900 billion, and excess reserves are $15 billion and the desired reserve ratio is 10%. a. Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier. b. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1400 billion due to a sharp contraction in the economy. Assuming the...
50) The Federal Open Market Committee A) is the main policy-making organ of the Federal Reserve. B) is headed by the president of the New York Federal Reserve Bank. C) consists of the Fed chairman and the 12 regional bank presidents. D) meets every week to review the state of the economy 50) 51) When the quantity of money demanded is greater than the quantity of moneyupplied, people 1) bonds and the interest rate A) buy; falls B) sell; falls...
1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending! c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...
Since 2008, the money supply has almost quadrupled, going from
$1.4t to $5.3t. At the same time, the Real GDP (the actual amount
of goods and services produced by the economy has increased by a
modest 23%, equivalent to an average growth of just under 2% per
year.
We expect that a large increase in the money supply without a
corresponding increase in the Real GDP would cause a very large
increase in inflation. In fact, since 2008 inflation has...
ECON2313 hw4 2019b View Review Mailings yout References AatbCeDE AaßbCcD: AalbCcDd E AaBb Aasb AaltbCeDdE Ap 4 A Aa Su Tele Heading 21 Headng 1 No Spacing Nerml A A Part II. Short Answer Questions 1. Explain how each of the following events affects the monetary base, the money multiplier, and the money supply. a. The Fed increases the interest rate it pays banks for holding reserves. When the Fed increases the interest rate, it pays banks to hold reserves....
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