The Fed decides to buy $50 million in bonds. A. Show the initial T-account at the...
The Fed decides to buy $50 million in bonds.
A. Show the initial T-account at the bank when this gets deposited.
B. If the Reserve Requirement is 25%, show the T-account after the first
loan is made.
C. What is the maximum amount the money supply could expand by from
this purchase. Show the T-account if the maximum number of loans and
deposits is made.
D. Show the affect of the change in the Money Market (your numbers don’t
have to be precise, just show the change to the equilibrium.)
E. Assume this purchase ultimately increased the overall money supply by
5%, if the growth rate of GDP was 2%, calculate the expected change to
inflation in the long run.
F. What are the other two ways the FED could have increased the money
supply?
Homework Answers
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The Fed decides to buy $50 million in bonds.
A. Show the initial T-account at the...
The Fed decides to buy $50 million in bonds. A. Show the initial T-account at the bank when this gets deposited. B. If the Reserve Requirement is 25%, show the T-account after the first loan is made....
The Fed decides to buy $50 million in bonds. A. Show the initial T-account at the bank when this gets deposited. B. If the Reserve Requirement is 25%, show the T-account after the first loan is made. C. What is the maximum amount the money supply could expand by from this purchase. Show the T-account if the maximum number of loans and deposits is made. D. Show the affect of the change in the Money Market (your numbers don’t have...
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?...
Suppose that JPMorgan Chase sells $300 million in Treasury bills to the Fed. a. Use T-accounts...
Suppose that JPMorgan Chase sells $300 million in Treasury bills to the Fed. a. Use T-accounts to show the immediate impact of this sale on the balance sheets of JPMorgan Chase and the Fed. (Enter your responses as integers. Include a minus sign to indicate a negative change, but do not include a plus sign for a positive change.) JP Morgan Chase Bank Assets Liabilities Securities million Reserves million Federal Reserve Assets Liabilities Securities million Reserves million b. Suppose that...
Table 3-2 Assets Liabilities Bonds Loans Vault cash Deposits at the Fed $250 Deposits $600 $100...
Table 3-2 Assets Liabilities Bonds Loans Vault cash Deposits at the Fed $250 Deposits $600 $100 $1,000 $50 18) Refer to Table 3-2. Consider the above simplified balance sheet for a bank. If the required reserve ratio, r, is 5%, what are this bank's required reserves, RR? A) $50. B) $100 C) $150. D) $400. 19) According to the quantity theory of money, if the money supply grows at 20% velocity doesn't change, and real GDP grows at 5%, then...
answer all of questions on number 2, and answer can't be cursive. 2. Use a T-Account...
answer all of questions on number 2, and answer can't
be cursive.
2. Use a T-Account to record a customer deposit of $20,000 into a checking account. Assume a fully loaned up system, no cash leakages and a required reserve of 10%. a. Show a properly labeled T Account (5 points) b. Indicate the maximum amount that a bank can loan out following the deposit. (5 points) C Indicate the potential money supply creation and change to money supply. Show...
Assume the Fed sells a $10m T-bill to First National Bank. a. Show the T-accounts of...
Assume the Fed sells a $10m T-bill to First National Bank. a. Show the T-accounts of the Fed and First National Bank. b. By how much will the monetary base change? c. If the reserve-deposit ratio is 15% and the currency-deposit ratio is 25%, calculate the eventual change in the money supply.
Consider the First National Bank with T-account as shown below. The First National Bank chose a...
Consider the First National Bank with T-account as shown below. The First National Bank chose a 30% reserve ratio. First National Bank Assets Liabilities Reserves Deposits $100 Loans Capital (Owners' Equity) $10 Other Assets $10 (1) How much deposits did the First National Bank keep in reserves? (2) How much deposits did the First National Bank loan out? (3) What is the leverage ratio for the First National Bank? (4) If some of the consumers and businesses who borrowed from...
Use T-account analysis to answer the following questions: a) You just deposited $100 of cash to...
Use T-account analysis to answer the following questions: a) You just deposited $100 of cash to your chequing account at TD bank. Use the T- account to record the change of TD bank’s balance sheet. Also write down the T- account for yourself. b) Suppose TD bank has a desired reserve ratio of 10%. To maximize profit, how much of loans can TD bank make at most? Use the T-account to record the change of balance sheet of TD bank...
Suppose that in a given month $40 million is deposited into the banking system while $50 million is withdrawn. Assume that the reserve requirement is 20 percent and that the banking system had no excess reserves at the beginning of the month. What is the
Suppose that in a given month $40 million is deposited into the banking system while $50 million is withdrawn. Assume that the reserve requirement is 20 percent and that the banking system had no excess reserves at the beginning of the month. What is the maximum change that can be expected in the money supply as a consequence of these deposits and withdrawals? Instructions: Enter a positive number to show an increase and a negative number to show a decrease. $ million
Suppose the Federal Reserve purchases $10,000 of Treasury bonds from you and that you deposit the...
Suppose the Federal Reserve purchases $10,000 of Treasury bonds from you and that you deposit the $10,000 into your checking account deposit at Bank Y. Assume that Bank Y has no excess reserves at the time you make your deposit and that the required reserve ratio is 20 percent. a. Use a T-account to show the initial effect of this transaction on Bank Y's balance sheet. b. Suppose that Bank Y makes the maximum loan they can from the funds...
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?...
Suppose that JPMorgan Chase sells $300 million in Treasury bills to the Fed. a. Use T-accounts to show the immediate impact of this sale on the balance sheets of JPMorgan Chase and the Fed. (Enter your responses as integers. Include a minus sign to indicate a negative change, but do not include a plus sign for a positive change.) JP Morgan Chase Bank Assets Liabilities Securities million Reserves million Federal Reserve Assets Liabilities Securities million Reserves million b. Suppose that...
Table 3-2 Assets Liabilities Bonds Loans Vault cash Deposits at the Fed $250 Deposits $600 $100 $1,000 $50 18) Refer to Table 3-2. Consider the above simplified balance sheet for a bank. If the required reserve ratio, r, is 5%, what are this bank's required reserves, RR? A) $50. B) $100 C) $150. D) $400. 19) According to the quantity theory of money, if the money supply grows at 20% velocity doesn't change, and real GDP grows at 5%, then...
answer all of questions on number 2, and answer can't
be cursive.
2. Use a T-Account to record a customer deposit of $20,000 into a checking account. Assume a fully loaned up system, no cash leakages and a required reserve of 10%. a. Show a properly labeled T Account (5 points) b. Indicate the maximum amount that a bank can loan out following the deposit. (5 points) C Indicate the potential money supply creation and change to money supply. Show...
Assume the Fed sells a $10m T-bill to First National Bank. a. Show the T-accounts of the Fed and First National Bank. b. By how much will the monetary base change? c. If the reserve-deposit ratio is 15% and the currency-deposit ratio is 25%, calculate the eventual change in the money supply.
Consider the First National Bank with T-account as shown below. The First National Bank chose a 30% reserve ratio. First National Bank Assets Liabilities Reserves Deposits $100 Loans Capital (Owners' Equity) $10 Other Assets $10 (1) How much deposits did the First National Bank keep in reserves? (2) How much deposits did the First National Bank loan out? (3) What is the leverage ratio for the First National Bank? (4) If some of the consumers and businesses who borrowed from...
Suppose the Federal Reserve purchases $10,000 of Treasury bonds from you and that you deposit the $10,000 into your checking account deposit at Bank Y. Assume that Bank Y has no excess reserves at the time you make your deposit and that the required reserve ratio is 20 percent. a. Use a T-account to show the initial effect of this transaction on Bank Y's balance sheet. b. Suppose that Bank Y makes the maximum loan they can from the funds...
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