5. If you withdraw money from your bank, it will reduce loans and deposits in the whole banking system. A question requiring a "True/False' answer (Required) O True O False 6.Monetary base is the money supplied by all the private banks. A question requiring a True/False' answer (Required) O True O False 7. Open market operations can change monetary supply but cannot change monetary base. A question requiring a 'True/False' answer. (Required) O True O False

5. If you withdraw money from your bank, it will reduce loans and deposits in the whole banking system. A question requiring a "True/False' answer (Required) O True O False 6.Monetary base is the money supplied by all the private banks. A question requiring a True/False' answer (Required) O True O False 7. Open market operations can change monetary supply but cannot change monetary base. A question requiring a 'True/False' answer. (Required) O True O False

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 4.9P

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16. Suppose that the Federal Reserve conducts an open market operation in which it purchases $100 in US Treasury bonds from a private saver. (a) In an economy without banks, by how much, in dollar terms, will the total money supply increase as a result of this open market operation? (b) In an economy with banks in which all members of the nonbank public immedi- ately deposit all of the currency they receive, but in which all banks engage in 100 percent reserve banking, by how much will the total money supply increase as a result of this open market operation? (c) In an economy with banks, in which all banks choose a 10% reserve ratio and in which all members of the nonbank public immediately deposit all of the currency they receive, by how much will the total money supply increase as a result of this open market operation? (d) In an economy with banks, in which all banks choose a 10% reserve ratio, but in which all members of the nonbank public hold 50% of the funds they receive as…
1. Legal reserve of a commercial bank A consists of cash in vault and deposits in the central bank. A question requiring a 'True/False' answer.(Required) O True O False 2.Required reserve can be used to make loans, purchase securities. A question requiring a 'True/False' answer.(Required) O True O False 3. An individual bank can create a multiple amount of deposit money from any given injection of reserves by using its excess reserve to make loans. A question requiring a 'True/False' answer.(Required) O True O False 4.If the Fed set the required reserve requirement ratio to be 0.02, bank A wishes to maintain 0.03 dollar in excess reserve for every 1 dollars in transaction deposit. What is the deposit multiplier? | (Required) If bank A found themselves with 10 in excess reserve, what is the maximum amount of new deposits (loan) created by the banking system? (Required)
3. Suppose the Fed buys $200 million in U.S. Treasury bills. a. Is this policy expansionary or contractionary? (3) 0. Show the changes to the T-accounts for commercial banks (i.e, all commercial banks together). (3) c. If the public holds a fixed amount of currency (so that all loans create an ec of deposits in the banking system), the minimum reserve ratio is 10%, and banks ho h uäll the money supply change?
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3. This question focuses on the market for central bank money. Assume that people hold no currency and that the ratio of reserves to deposits is 0.1. The demand for money money is given by Md = $Y (0.8-4i) The nominal income is $5000 and the supply of central bank money is $100. (a) What is the demand for central bank money? (b) Find the equilibrium interest rate in the market for central bank money.
1. Suppose that a bank’s customer deposits $20,000 in her checking account. The required reserve ratio is 0.125. What are the required reserves on the new deposit? What is the largest loan that the bank can make on the basis of the new deposit? What is the maximum the banking system can increase demand deposits as a result of this deposit? -------------
19. Suppose that the money supply is $100, the velocity of money is 4, and real GDP is 200. (a) What is nominal GDP? (b) What is the price level (the GDP deflator)? (c) Assuming that the velocity of money is constant, what will nominal GDP equal if the Fed acts to increase the money supply to $200? (d) Assuming that the velocity of money is constant and that "money is neutral in the long run," what will real GDP equal in the long run if the Fed acts to increase the money supply to $200? (e) Still assuming that the velocity of money is constant and that money is neutral in the long run, what will the price level equal in the long run if the Fed acts to increase the money supply to $200?
16. The demand curve for money O indicates the amount that consumers wish to borrow at a given interest rate. shows the amount of money that individuals and businesses wish to hold at various nominal interest rates. shows the amount of money balances that individuals and businesses wish to hold at various levels of private investment. O reflects the open market operations policy of the Federal Reserve. TOSHIBA
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1. Why does the public want to hold some of its wealth as money? Answer the following: (a) What is the basic determinant of the transactions demand? The level of_ - The higher this level, the ( smaller, greater) the amount of money demanded for transactions. (b) the asset demand for money? The level of - The higher this level, the (smaller, greater ) the amount of money demanded as an asset.
4. Which of the following characteristics of money is associated with the base good being divisible? a. Unit of account b. Store of value c. Medium of exchange 5. Which of the following characteristics of money is associated with the base good being easily portable? a. Unit of account b. Store of value c. Medium of exchange 6. The Federal Reserve's dual mandate is that monetary policy should accomplish An effective allocation of capital and stable property rights b. A well-capitalized banking system and an empowered democracy c. A stable return on the stock market and reasonable bond yields d. Price stability and full employment а.
Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.