Suppose rr = required reserve ratio = 0.1 C = currency in circulation = $1,200 billion D = checkable deposits = $1,600 billion ER = excess reserves = $2,500 billion M = money supply (M1) = C + D = $2,800 billion The currency ratio (currency-to-deposits ratio) is 0.75 and the excess reserve ratio is [Select] The money multiplier is [Select] Answer 1: 0.75 Answer 2: 1.56 Answer 3: 0.1

Suppose rr = required reserve ratio = 0.1 C = currency in circulation = $1,200 billion D = checkable deposits = $1,600 billion ER = excess reserves = $2,500 billion M = money supply (M1) = C + D = $2,800 billion The currency ratio (currency-to-deposits ratio) is 0.75 and the excess reserve ratio is [Select] The money multiplier is [Select] Answer 1: 0.75 Answer 2: 1.56 Answer 3: 0.1

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 5WNG

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2. Suppose that the required reserve ratio is 8% (i.e. rr = RR = 0.08), banks hold 5% of checking ER account deposits as excess reserves (i.e. e = = 0.05), and the currency-to-deposit ratio is 0.5 (i.e. c= = 0.5). a. Use this information to calculate the money multiplier. b. How would your answers to part (a) change if banks become concerned about risks inxolved in making loans and now choose to hold 20% of checking account deposits as excess, reserves (e=0.20)? Compute the new value of the money multiplier. c. Starting from part (a) what happens to money multiplier if people decide to hold more CUTTENCY, resulting in an increase in currency-deposit from c 0.5 to c 0.8? d. If the Fed conducts open market operations and buys $100 million in Treasury bonds from banks, what will happen to money supply using the multipliers in part (a), (b), and part (c)?
Which volume of OMOs is required to keep money supply unchanged, if demand for borrowedreserves increases by $0.5 trillion and the central bank decreases required reserves ratio from 10 to7% (the volume of required reserves created by the banking system was 1.5 trillion)? Use the conceptof a money multiplier and currency ratio of 0.2 and excess reserves ratio of 0.03.
Suppose that the following information describes the banking system in Belarus. Currency = $940 billion Checking Deposits = $1,475 billion Total Reserves = S198 billion Required Reserves = $177 billion (a) Calculate the level of the monetary base (MB) in the banking system of Belarus. (b) Given the above data calculate the money multiplier (m). Round vour answer to 2 decimal places.
Suppose the total reserves held by banks amount to R13.09 million. Banks hold R1 in excessreserves for every R10 of required reserves held and the required reserve ratio (r) is 8.5%. Thetotal amount of currency = R60 million. Calculate the amount of required reserves, and totalamount of deposits held by banks, and the total amount of money supply in the system.
ou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 1212%, how much will your deposit increase the total value of checkable bank deposits? $ If the reserve requirement is 44%, how much will your deposit increase the total value of checkable deposits? $ Increasing the reserve requirement the money supply.
2. Suppose the required reserve ratio is 11%, currency in circulation is $285 billion, the amount of checkable deposits is $600 billion, and excess reserves are $192 billion. Suppose the central bank is fighting rising inflation. The FOMC wants the money supply to fall by $80 billion. Assuming the ratios you calculated in question 1 are the same, calculate the size of the open market sale that would be needed to cause a change in the money supply of $80 billion.
Which volume of OMOs is required to decrease money supply by $700,000 billion, if demand for borrowed reserves grows by $100,000 billion, other things being equal? Use the concept of a money multiplier and currency ratio of 0.2, required reserves ratio of 0.07, excess reserves ratio of 0.03.
Chapter 16: Reserves = $1,500 First national bank Loaned = $8,500 Chapter 17: Deposits = $10,000 Money Created = Amount x MM 1. If the bank has to maintain a required reeserve ratio of 10% then what is the excess reserve if any? 1/P 2. If the reserve ratio is 10% then what will be money multiplier 3. How much extra money the bank will be able to create with an addtional MS 3/4 # 1/2 0 Total Reserve = Required Reserve + Excess Reserve Money Multiplier = 1/R Where R is Reserve Ratio MD 1. What is the price level at the equilibirum? 2. What is the value of money at the equilibirum? 3. If the velocity is 4, money supply is 100, price level is 10 then what will be the output? MXV=PXY P= Price level Value of Money = 1/P
Total reserves $55 billion Transactions deposits: $600 billion Cash held by public: $400 billion Bonds held by public: $400 billion Stocks held by public: $140 billion Gross domestic product: $8 trillion Interest rate: 6 percent Required reserve ratio: 0.10 How large is the money supply (M1)? How much excess reserves are there? What is the money multiplier? What is the available lending capacity?
9 If the interest rate................... opportunity cost of holding money decreases, and the quantity demanded of money increases; decreases decreases; increases £0000 increases; also increases does not change; does not change 10 If the total deposits-on-demand in Bank A total $500 mil and the required reserve ratio is 2.5 percent, then required reserves at Bank A equal more than 1,300,000,000 equal to 13,000,000 less than 13,000,000 more than 13,000,000
M1 and M2 are two measures of money supply. M1 includes only the most liquid forms of money like currency, checking account deposits, and traveler’s checks. M2 includes all of M1 along with some less liquid forms of money like savings accounts and money market deposits. Suppose you transfer $2,000 from your mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2 as per the economy?
4. a) Suppose that Tk.10,000 in new taka bills (never seen before) falls magically from the sky into your hands. What are the minimum increase and the maximum increase in the money supply that may result? Assume the required reserve ratio is 10 percent.b) Suppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not?c) Suppose that instead you getting Tk. 10,000 from the sky or a check through your grandmother, you get the money from your mother who had buried it in a can in her backyard. In this case, would the maximum increase in the money supply be what you found it to be in part a)? Why or why not?