12Questions on Monetary PolicyIf the required reserve ratio is 15%, how much is the money multiplier? (to the two decimal point)type your answer...Which of the below decreases money supply?banks give out more loansincrease in overnight policy ratecentral bank purchases government securities from commercial bankscentral bank reduces required reserve ratio

The first question is asking for the calculation of the money multiplier given a required reserve…

Answered: 1 2 Questions on Monetary Policy If the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. What “backs" the money supply in the United States? What determines the value (domestic purchasing power) of money? How does the purchasing power of money relate to the price level? Who in the United States is responsible for maintaining money's purchasing power? There is ( no, some ) concrete backing to the money supply in the United States. Paper money, which has ( some, no ) intrinsic value, has value only because people are willing to accept it in exchange for goods and services, including their labor services as employees. And people are willing to accept paper as money because they know that everyone else is also willing to do so. If the monetary authorities were issuing new banknotes at a rate far in excess of available output, the acceptability of paper money would (increase, diminish ). People would start to worry about whether the banknotes would be worth much after they received them. Checks are part of the money supply and ( are, are not) legal tender, but people accept…
Question: What is the role of the federal funds rate in monetary policy, and how does the central bank use this rate to influence the economy? A) The federal funds rate has no impact on monetary policy. B) The federal funds rate is the interest rate at which banks lend reserves to each other overnight, and the central bank adjusts this rate to influence borrowing costs, spending, and overall economic activity. C) The federal funds rate is the interest rate at which banks lend to consumers, and it is controlled by the government. D) The federal funds rate determines government spending levels.
4) Listen If the money multiplier decreased from 20 to 4, then the Fed increased the reserve ratio from 5 percent to 8 percent. the Fed increased the fed funds rate from 5 percent to 8 percent. the Fed increased the reserve ratio from 5 percent to 25 percent. the Fed decreased the fed funds rate from 8 percent to 5 percent. Question 30 (1 point) )Listen The FOMC is able to increase the money supply when it buys US government securities. The increase will be larger, the larger is the reserve ratio. buys US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the larger is the reserve ratio.
13. Use the Quantity Theory of Money to explain how long run inflation occurs. If the Federal Reserve Bank wishes to keep the inflation rate at zero percent, at what rate should the money supply grow? Why?
8. The reserve requirement, open market operations, and the moneysupply Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the case in the U.S. prior to 2008.) 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) 5 10 Simple Money Multiplier A lower reserve requirement is associated with a Money Supply (Dollars) money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that,…
Sccnario: Monetary Basc and Money Supply Assume that the reserve is 20% and the monetary aggregates are as follows: Bank reserves at the Federal Reserve Currency held by the public Currency in the bank vaults Checkable bank deposits Traveler's checks $100 billion $75 billion $50 billion $250 billion $5 billion Reference: Ref 14-9 (Scenario: Monetary Base and Money Supply) Look at the scenario Monetary Base and Money Supply. How much is the monetary base? $225 billion O $330 billion O $175 billion O $325 billion

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