5. The simple money multiplierSuppose that the Federal Reserve ("the Fed") buys $150,000 of U.S., government bonds and the required reserve ratio is 0.30. If the assumptions ofthe simple money multiplier hold, this willthe money supply byWhich of the following assumptions is necessary for the simple money multiplier to be applicable?The amount of cash people want to hold doesn't change when the money supply changesPeople's marginal propensity to consume does not rise with income.Borrower default rates are stable.If the correct assumption did not hold, the change in the money supply would bedescribes why this holds true?than you previously found. Which of the followingIf people kept some of the new money as cash rather than depositing it in another bank, this cash could not in turn become a bank loan.If people's marginal propensity to consume rose with income, they would save less, removing money from the financial system.

The simple money multiplier, additionally recognized as the money multiplier, is a monetary idea…

5. The simple money multiplier Suppose that the Federal Reserve ("the Fed") buys $150,000 of U.S. government bonds and the required reserve ratio is 0.30. If the assumptions of the simple money multiplier hold, this will the money supply by Which of the following assumptions is necessary for the simple money multiplier to be applicable? O The amount of cash people want to hold doesn't change when the money supply changes People's marginal propensity to consume does not rise with income. O Borrower default rates are stable. If the correct assumption did not hold, the change in the money supply would be describes why this holds true? than you previously found. Which of the following If people kept some of the new money as cash rather than depositing it in another bank, this cash could not in turn become a bank loan. Of people's marginal propensity to consume rose with income, they would save less, removing money from the financial system.

5. The simple money multiplier Suppose that the Federal Reserve ("the Fed") buys $150,000 of U.S. government bonds and the required reserve ratio is 0.30. If the assumptions of the simple money multiplier hold, this will the money supply by Which of the following assumptions is necessary for the simple money multiplier to be applicable? O The amount of cash people want to hold doesn't change when the money supply changes People's marginal propensity to consume does not rise with income. O Borrower default rates are stable. If the correct assumption did not hold, the change in the money supply would be describes why this holds true? than you previously found. Which of the following If people kept some of the new money as cash rather than depositing it in another bank, this cash could not in turn become a bank loan. Of people's marginal propensity to consume rose with income, they would save less, removing money from the financial system.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

Section: Chapter Questions

Problem 9PA

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Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? O A. An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier OB. An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier OC. Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. OD. Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.
. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000. If the Bank of Canada requires banks to hold 5 percent of deposits reserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
. Assume that the banking system has total reservesof $100 billion. Assume also that required reservesare 10 percent of checking deposits and that bankshold no excess reserves and households hold nocurrency.a. What is the money multiplier? What is the moneysupply?b. If the Fed now raises required reserves to20 percent of deposits, what are the change inreserves and the change in the money supply
Question 3 In the market for reserves, suppose that the federal funds rate and discount rate are both at 7%. If the Federal Reserve Bank sells securities in the open market, then the equilibrium rate for reserves will and the amount of borrowed reserves will O not change; decrease O not change; increase O rise; increase O rise; decrease Question 4 When the Federal Reserve Bank lowers the reserve requirements for commercial banks in the economy, this causes the curve for reserves to decrease and so the curve shifts to the ----- O demand; right O demand: left O supply; right O supply; left
When the Federal Reserve sells Treasury bonds to the public, this will cause reserves in the banking system to and the money supply is likely to O decrease : decrease O increase : decrease O decrease : increase O increase : increase « Previous Next ASUS 15 R
Suppose that the reserve requirement for checkingdeposits is 10 percent and that banks do not hold anyexcess reserves.a. If the Fed sells $1 million of government bonds,what is the effect on the economy’s reserves andmoney supply?b. Now suppose that the Fed lowers the reserverequirement to 5 percent but that banks chooseto hold another 5 percent of deposits as excessreserves. Why might banks do so? What is theoverall change in the money multiplier and themoney supply as a result of these actions?
As a result of the Fed's sale of $3,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Yvette, a First Main Street Bank's customer, re-pays back the $3,000 loan she took out a few months ago. Which of the following most accurately describes First Main Street Bank's actions? O The bank keeps the $450 as reserves. O The bank creates a $3,000 loan. O The bank keeps the $3,000 as reserves. O The bank creates a $42,000 loan. The money supply in the economy is چلے
1. Suppose that the reserve requirement for chequing deposits is 15 % and the banks donot hold any excess reserves. What is the effect on the economy’s reserves and themoney multiplier if the central bank sells $2 million of government bonds? 2. Now suppose the central bank lowers the reserves requirement to 5%, but the Savers’banks choose to hold another 5% deposits as excess reserves. State two reasons whythe Savers’ bank want to hold excess reserves 3. Analyse briefly the impact of the overall change in the money multiplier and the moneysupply as a result of the policies implemented by the Savers’ bank.
Which set of actions could the central bank use to increase the money supply? Select one: O a. an open market purchase and a tax cut O b. a discount rate cut and an open market sale O c.a reduction in the required reserve ratio and an open market purchase O d. a reduction in the required reserve ratio and an open market sale
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the (economy-wide) currency ratio, carefully following all numeric instructions. Do not convert the ratio into percent. In other words, if you get k of 0.99, enter only 0.99 in the blank.
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the "real-world multiplier," carefully following all numeric instructions.