Question

I know the answer, but i don’t know how to calculation.

1) If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are and the money supply is_ 2) The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market government bonds 3) You expect a share of EconNews.Com to sell for S65 a year from now and to pay a $2 dividend per share in one year. What should you pay (rounded to the nearest dollar) for the stock today if you require an 8% return? 4) If the Central Bank of Macroland puts an additional 1,000 dollars of currency into the economy, the public deposits all currency into the banking system, and banks have a desired reserve/deposit ratio of 0.10, then the banks will eventually make new loans totaling will increase by and the money supply

Answer 1

(1)

Reserve/Deposit = 0.25

200 / Deposit = 0.25

Deposit = 200 / 0.25 = 800

Money supply = Currency + Deposit = 400 + 800 = 1200

(2)

To increase the money supply, Central bank should conduct open market PURCHASE of government bonds.

(3)

Current payment ($) = (65 + 2) x P/F(8%, 1)

= 67 x 0.9259

= 62.04

**From P/F Factor table

NOTE: As per Answering Policy, 1st 3 questions are answered.