22. Suppose the public holds 30% of theirmoney as currency and the rest as deposits intheirbanks. Moreover, the central bank requiresbanks to maintain a reserve-deposit ratio of15%. What will be the change in the totalmoney supply if the central bank buys $10million of government bonds from the publicand pays for them by creating money(round to the nearest decimal point)?a. The money supply will decrease by $51.3millionb. The money supply will increase by $51.3millionc. The money supply will increase by $24.7milliond. The money supply will increase by $66.7millione. All of the answers here are incorrectApparently the answer is c, can anyone pleaseexplain it to me? i keep getting a differentanswer

Given information Public holds =30% Reserve ration= 15%

Answered: 22. Suppose the public holds 30% of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8 99 Interest rate (percent) 4 2 0 MS1 MS2 E₁ 200 400 600 800 Quantity of money (billions of dollars) MD Starting from an equilibrium at E, in Exhibit 16-2, a rightward shift of the money supply curve from MS, to MS₂ would cause excess: A demand for money, leading people to sell bonds. B supply of money, leading people to buy bonds. supply of money, leading people to sell bonds. demand for money, leading people to buy bonds.
40
2. Consider the following: B= 1,000 (billion) cr=0.6 TT= 0.15 a. What is the money multiplier, m? b. With this money multiplier, what would the money supply be if the monetary base was 1,000 (billion)? c. Imagine if cr increased to 0.8. What does this mean, in words? How would the money multiplier be affected (if at all)? What about the money supply?
1. Suppose velocity is 3, real output is 9000, and the price level is 1.5. What is the level of real money balances in this economy? 2. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of reserves in this economy? 3. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of the money multiplier in this economy? Please answer the three questions above (and highlight the answer if you can). Please explain the math/reasoning used
The neutrality of money revisited a. Fill in the empty spaces after Year 1 in the chart below: b. What is the growth rate of the nominal money supply between years 1 and 2, 2 and 3, and 3 and 4? c. What is the rate of inflation between years 1 and 2, 2 and 3, and 3 and 4? d. What is the change in the real money supply between years 1 and 2, 2 and 3, and 3 and 4? e. What assumption has been made about real output growth if this data describe the medium run?
_______ is the most liquid measure of money supply
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
3. What would be the effect of increasing the banks' reserve requirements on the money supply?
1. Explain with aid of a diagram what happens to the money supply, money demand, the value of money, and the price level if the Central Bank increases the money supply.
A hypothetical economy is having currency in circulation of $100m, and deposits of $400m. Assume that required reserves are $40m and excess reserves are 60m a) Calculate the monetary base. How much is the money supply? b) Calculate the effect on the money supply of a decrease of currency in circulation by $40m c) What would the central bank do to offset the effects of the decrease in the currency in circulation by $40m?
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.
35. In an economy where the interest rate is 10%, the reserve ratio is 8%, the cash currency ratio is 20%, and the excess reserve ratio is 2%, if the monetary supply is 100 won, what is the money supply? (Omit the unit and answer with an integer.)

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