13. The velocity of money can be defined as a. Nominal GDP times the price level b. Real GDP divided by the price level c. Nominal GDP divided by the money supply d. The price level divided by the money supply 14. Suppose nominal GDP is $17.5T and the M2 money supply is $9.72T. What is the M2 velocity of money? a. 1.4 b. 1.6 с. 1.8 d. 2.0 15. Suppose money growth is 7% and output growth is 3%. What is the expected long run increase in prices predicted by the quantity equation? а. 10% b. 7% C. 4% d. 3%

13. The velocity of money can be defined as a. Nominal GDP times the price level b. Real GDP divided by the price level c. Nominal GDP divided by the money supply d. The price level divided by the money supply 14. Suppose nominal GDP is $17.5T and the M2 money supply is $9.72T. What is the M2 velocity of money? a. 1.4 b. 1.6 с. 1.8 d. 2.0 15. Suppose money growth is 7% and output growth is 3%. What is the expected long run increase in prices predicted by the quantity equation? а. 10% b. 7% C. 4% d. 3%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Central Bank requires banks to maintain a 10% legal minimum reserve requirement of their deposits, banks lend out all their excess reserves, and deposits stay within banking institutions and are not withdrawn into currency circulation. When Terry received a cash gift of $20,000 that she deposited into her checkable deposit account, what was the full effect on money supply M1? A. increased by $2,000 B. increased by $20,000 C. increased by $200,000 D. cannot be determined E. no change in M1
2. Problems and Applications Q2 If the Fed wants to increase the money supply, it can If the Fed wants to decrease the money supply, it can If the Fed wants to increase the money supply, it can bonds in open-market operations. the reserve requirement. the interest rate it pays on reserves. When the FOMC decreases its target for the federal funds rate, the money supply will If people decide to hold less currency after a rash of pickpocketing, the money supply
14. Suppose the actual overnight interest rate is 5%. If the central bank lowers its target overnight rate to 4.5%, the money supply will eventually decrease as a result of an increase in excess reserves in the banking system. decrease as a result of open-market operations. increase as a result of open-market operations. decrease as a result of a decrease in the demand for new loans. increase as a result of an increase in excess reserves in the banking system.
N7 2. Show 3 rounds of deposits, starting with a $2000 deposit into a checking account at bank A. Assume the required reserve rate is 5% . a. Show the effect at bank A b. Show the effect at bank B C. Show the effect at bank C d. What will be the total increase to the money supply?
4. The U.S. Federal Reserve responded to the 2020 COVID-19 lockdowns by imple-menting an expansionary monetary policy, causing M2 money supply to rise from $15.33 trillion in December 2019 to $18.3 trillion in July 2020. Over the same period, real GDP fell by 5.1 percent. (a) Assuming that the velocity of money was constant over this period, what should theinflation rate be, based on the quantity equation? Show your work. (b) Why would you not expect inflation to be immediate, following the monetary ex-pansion?
The money multiplier declined significantly during the period 1930-1933 and also during the recent financial crisis of 2008-2010. Yet the M1 money supply decreased by 25% in the Depression period but increased by more than 20% during the recent financial crisis. What explains the difference in outcomes? A. The excess reserves ratio increased rapidly during the recent financial crisis. B. There was a minimal increase in the currency ratio during the recent financial crisis. C. There was a significant increase in the monetary base during the recent financial crisis. OD. The overall level of deposit expansion decreased during the recent financial crisis.
b. The banking system has $10 million in reserves, the reserve requirement is 20 percent, and there are no excess reserves. The public holds $10 million in cash. Assume that the central bank purchases $2 million government bonds in open market operations. Calculate the change in money supply resulted from the above policy and show its effects on interest rates and money quantity in the money market diagram.
Pls help with below homework.
Which of the following statements is INCORRECT? The smaller the curency drain ratio, the larger is the money multiplier. The quantity of money that banks can create is limited by the size of the monetary base. O Canada's M2 multiplier is larger than Canada's M1 multiplier. The larger the currency drain ratio, the larger is the deposit multiplier. The smaller the reserve ratio, the larger is the money multiplier
15. All else equal, a decrease in reserve requirements will cause a.state and local government expenditures to fall.b.inflation expectations to fall.c.an increase in the Fed Funds rate.d.excess reserves to increase.e.All of the above will occur. 16. An increase in depository institutions' reserves will causea.the Fed Funds rate to rise.b.planned inventory investment to fall.c.depository institutions to lend more freely.d.foreign investors to buy more T-Bills.e.None of the above.
12. Which of the following is not included in M1? a. Currency b. Demand deposits c. Savings deposits d. Traveler's checks 13. Rashad and Brianna decide to go on a vacation, As a result, they withdraw $5,000 from their savings account to purchase $5,000 worth of traveler's checks. As a result of these changes, a. MI increases by $5,000 and M2 decreases by $5,000. b. MI increases by $5,000 and M2 stays the same. c. MI and M2 stay the same. d. M1 decreases by $5,000 and M2 increases by $5,000. 14. When the Fed decreases the discount rate, banks will a. borrow more from the Fed and lend more to the public. The money supply increases. b. borrow more from the Fed and lend less to the public. The money supply decreases. c. borrow less from the Fed and lend more to the public. The money supply increases. d. borrow less from the Fed and lend less to the public. The money supply decreases. 15. The price index was 105 in Year 1 and 111 in Year 2. What was the inflation rate? a. 5.7 percent b.…
5. Use the information below to answer the following questions: C=currency = 1000, Deposits-D = 800, 11. = 0.1, e-excess reserve ratio = 0.25. What is the value of excess reserves, ER? a. b. What is the value of the monetary base, MB? c. What is the value of the money multiplier, m? d. What is the value of the money supply, M? If the required reserve ratio increases to rr=0.15, what will be the new value of the money multiplier?