3. Assume the required reserve ratio is 40% and the Open Market Committee of the FED...
3. Assume the required reserve ratio is 40% and the Open Market Committee of the FED sells $500 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $9500 billion, what is the new M1 ( After the change)You must show your work.
4. Assume the required reserve ratio is 10% and the Open Market Committee of the FED buys $50 billion in bonds from the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $9500 billion, what is the new M1 ( After the change)?You must show your work.
Homework Answers
3):-An open market sale decreases money supply.
Decrease in money supply ($ billion) = Open = market sale / Reserve ratio = 500 / 0.4 = 1250
(ii) An open market sale decreases transaction accounts. Decrease in transaction accounts ($ billion) = = ease in money supply Open market sale = 1250 - 500 = 750
(iii) New M1 ($ billion) = 9500-1250 = 8250
According to HOMEWORKLIB RULES we have right to do one question in one time i hope you understand
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3. Assume the required reserve ratio is 40% and the Open Market
Committee of the FED...
Open Market Operations Assume the required reserve ratio is 40% and the Open Market Committee of...
Open Market Operations Assume the required reserve ratio is 40% and the Open Market Committee of the FED sells $500 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? What is the total change in Transaction Accounts? If the M1 was originally $9,500 billion, what is the new M1?
The Fed conducts an open market sale of bonds. $50 million and the reserve ratio is...
The Fed conducts an open market sale of bonds. $50 million and the reserve ratio is 20% and after the sale. a. Does the money supply INCREASE or DECREASE? (circle) b. How much does the money supply change? 9. Suppose a country has a 100% reserve requirement for all banks. a. How much does the money supply change from a deposit of $100 by a housen b. What is the role of banks in moving funds from depositors to borrowers?...
Discussion Questions for Tuesday, Apr. 23 1. Suppose the Fed conducts $10 million open market pur...
Discussion Questions for Tuesday, Apr. 23 1. Suppose the Fed conducts $10 million open market purchase from Bank A. If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? 2. Let's assume that in a hypothetical economy currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, excess reserves are $15 billion and required reserve ratio is...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and sells foreign currency. manipulates of the rate at which it loans to member banks. increases or decreases the required reserve ratio. How will the Fed's policy action change the money supply? Use only the actions corresponding to your choice in the previous part. The money supply increases The money supply decreases Answer Bank Answer Bank The Fed sells foreign currency The Fed buys bonds...
Assume that the banking system is loaned up and that any open-market purchase by the Fed...
Assume that the banking system is loaned up and that any open-market purchase by the Fed directly increases reserves in the banks. If the required reserve ratio is 0.2, by how much could the money supply expand if the Fed purchased $2 billion worth of bonds?
8. The Fed conducts an open market sale of bonds, $50 million, and the reserve ratio...
8. The Fed conducts an open market sale of bonds, $50 million, and the reserve ratio is 20% before and after the sale a. Does the money supply INCREASE or DECREASE? (circle) b. How much does the money supply change?_
Problem 7: The Fed conducts $20 million open-market purchase of government bonds. If the required reserve...
Problem 7: The Fed conducts $20 million open-market purchase of government bonds. If the required reserve ratio is 10 percent, what is the largest possible increase in the money supply that could result? Explain. What is the smallest possible increase? Explain.
8. The reserve requirement, open market operations, and the money supply Assume that banks do not...
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 Requirement (Percent) Money Supply (Dollars) Simple Money Multiplier A lower reserve requirement is associated...
8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold...
8. The reserve requirement, open market operations, and the moneysupply 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 $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 15 Money Supply (Dollars) Simple Money Multiplier 10 A lower reserve requirement is...
7. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold...
7. The reserve requirement, open market operations, and the moneysupply 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 $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) Money Supply (Dollars) Simple Money Multiplier A higher reserve requirement is associated with...
The Fed conducts an open market sale of bonds. $50 million and the reserve ratio is 20% and after the sale. a. Does the money supply INCREASE or DECREASE? (circle) b. How much does the money supply change? 9. Suppose a country has a 100% reserve requirement for all banks. a. How much does the money supply change from a deposit of $100 by a housen b. What is the role of banks in moving funds from depositors to borrowers?...
Discussion Questions for Tuesday, Apr. 23 1. Suppose the Fed conducts $10 million open market purchase from Bank A. If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? 2. Let's assume that in a hypothetical economy currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, excess reserves are $15 billion and required reserve ratio is...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and sells foreign currency. manipulates of the rate at which it loans to member banks. increases or decreases the required reserve ratio. How will the Fed's policy action change the money supply? Use only the actions corresponding to your choice in the previous part. The money supply increases The money supply decreases Answer Bank Answer Bank The Fed sells foreign currency The Fed buys bonds...
8. The Fed conducts an open market sale of bonds, $50 million, and the reserve ratio is 20% before and after the sale a. Does the money supply INCREASE or DECREASE? (circle) b. How much does the money supply change?_
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 Requirement (Percent) Money Supply (Dollars) Simple Money Multiplier A lower reserve requirement is associated...
8. The reserve requirement, open market operations, and the moneysupply 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 $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 15 Money Supply (Dollars) Simple Money Multiplier 10 A lower reserve requirement is...
7. The reserve requirement, open market operations, and the moneysupply 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 $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) Money Supply (Dollars) Simple Money Multiplier A higher reserve requirement is associated with...
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