Just this page. Thank you 3 UNIT4 Macroeconomics LESSON 3 I ACTIVITY 37 (contimusd)5. Assume that $1,000 is deposited in the bank, and that each bank loans out all of its excessreserves. For each of the following required reserve ratios, calculate the amount that the bankmust hold in required reserves, the amount that will be excess reserves, the deposit expansionmultiplier and the maximum amount that the money supply could increase.Required Reserve Ratio1%5%10%12.5%15%25%Required reservesExcess reservesDeposit expansion multiplierMaximum increase in themoney supply6. If the required reserve ratio were 0 percent, then money supply expansion would be infinite. Whydon't we want an infinite growth of the money supply? (Hint: remember the equation ofexchange: MV = PQ.)7. If the Federal Reserve wants to increase the money supply, should it raise or lower the reserverequirement? Why?8. If the Federal Reserve increases the reserve requirement and velocity remains stable, what wilhappen to nominal GDP? Why?9. What economic goal might the Federal Reserve try to meet by reducing the money supply?10. Why might the money supply not expand by the amount predicted by the deposit expansionmultiplier?198Advanced Placement Economics Macroeconomics: Student Activities O National Council on Economic Education, New York, N.Y.

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5. Assume that $1,000 is deposited in the bank, and that each bank loans out all of its excess reserves. For each of the following required reserve ratios, calculate the amount that the bank must hold in required reserves, the amount that will be excess reserves, the deposit expansion multiplier and the maximum amount that the money supply could increase. Required Reserve Ratio 1% 5% 10% 12.5% 15% 25% Required reserves Excess reserves Deposit expansion multiplier Maximum increase in the money supply

5. Assume that $1,000 is deposited in the bank, and that each bank loans out all of its excess reserves. For each of the following required reserve ratios, calculate the amount that the bank must hold in required reserves, the amount that will be excess reserves, the deposit expansion multiplier and the maximum amount that the money supply could increase. Required Reserve Ratio 1% 5% 10% 12.5% 15% 25% Required reserves Excess reserves Deposit expansion multiplier Maximum increase in the money supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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