2. Multiple Choice Question #2 Sara withdraws $2,000 from her small time deposit account at Bank of America, keeps $400 in cash, and deposits the rest in her checking account at Citibank. What is the immediate change in M1 and M2? M1 increases by $400 and M2 decreases by $400. M1 and M2 increase by $2,000. M1 increases by $2,000 and there is no change in M2. M1 increases by $2,000 and M2 decreases by M2.

2. Multiple Choice Question #2 Sara withdraws $2,000 from her small time deposit account at Bank of America, keeps $400 in cash, and deposits the rest in her checking account at Citibank. What is the immediate change in M1 and M2? M1 increases by $400 and M2 decreases by $400. M1 and M2 increase by $2,000. M1 increases by $2,000 and there is no change in M2. M1 increases by $2,000 and M2 decreases by M2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If Bank A's total reserves are $10.8 million, its excess reserves are $4.60 million, and the required reserve ratio is 4%, then Bank A's required reserves equal and its total deposits equal $6.2 million; $105 million $6.6 million; $165 million O $6.6 million; $270 million O $6.1 million; $122 million $6.2 million; $155 million
The economy of Lykesville currently has $15,000 worth of currency in circulation, $20,000 worth of checkable deposits, $1,300 worth of traveler's checks, and $44,000 in savings accounts. Calculate M1:
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5. Money Multiplier: Given: Money Multiplier: 1+c rr+e+C required reserve ratio = 0.10 C = currency in circulation = $ 400 billion D =_ checkable deposits = $800 billion ER = excess reserve - $0.80 billion M = money supply_(M1) = C + D = $1,200 c = currency ratio = C/D = $400/$800= 0.5 e = excess reserve ratio = ER/D = $.80 b/ $800 b Using the formula for the money multiplier above, derive is the Money Multiplier?
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1.Name a reason why retail Money Market Mutual Funds are not included in M1 but demand deposits and other checkable deposits are. What specific role of money does this analysis (e.g. medium of exchange, standard of value, standard of deferred payments, store of value) pertain to? 2.Passbook savings accounts and NOW accounts (part of checkable deposits) are both interest bearing bank deposits, but NOW accounts have checkable privileges and passbook savings accounts have no checkable privileges. Then why would anyone have a passbook savings deposit? Provide the economic concept behind this argument 3.Choose an interest rate other than the 3 month Treasury Bill rate or the Federal Funds rate. Provide a definition for this interest rate. Now consider the website of the Federal Reserve Economic Database (FRED), given by http://research.stlouisfred.org/fred2/. Using this database, look up the series for monthly observations for this interest rate, and provide a graph of this…
1. If the reserve ratio is 10%, a bank with $1,000 in deposits has required reserves of $ Type your answer here 2. If a bank is holding required reserves of $100 to support $500 in deposits, the reserve ratio is Type your answer here 3. If a bank with $500 in deposits is holding reserves of $50 when the reserve ratio is 10%, the bank has excess reserves of $ %. Type your answer here
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25. Assume: a required reserve ratio of 5%, this bank is the only one with excess reserves, banks do not wish to hold excess reserves and the public does not wish to increase its cash holdings. What is the maximum amount of new money the banking system can create? a) $700,000 b) $400,000 c) $4,000,000 d) $5,000,000 e) $11,000,000
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