Assume that individuals do not hold currency. If the reserve ratio is equal to 5 percent, then if the central bank wants to increase money supply in the economy by$100 million, the monetary base should be increased by:$5 million$20 million$50 million$100 million$500 million

Required reserve ratio is the minimum requirement of reserve that banks are needed to hold which…

Assume that individuals do not hold currency. If the reserve ratio is equal to 5 cent, then if the central bank wants to increase money supply in the economy $100 million, the monetary base should be increased by: $5 million $20 million $50 million $100 million $500 million

Assume that individuals do not hold currency. If the reserve ratio is equal to 5 cent, then if the central bank wants to increase money supply in the economy $100 million, the monetary base should be increased by: $5 million $20 million $50 million $100 million $500 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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How do changes in interest rates impact consumer spending, business investment, and overall economic activity, and how does the central bank use interest rates as a tool of monetary policy? A) Changes in interest rates have no effect on economic activity. B) Lower interest rates typically encourage consumer borrowing and business investment, stimulating economic activity. The central bank uses interest rate adjustments as a tool to influence borrowing and spending. C) Higher interest rates boost economic activity by increasing consumer savings. D) Changes in interest rates only affect government spending.
Please show equation: If the required reserve ratio (RRR) in the U.S. is 40 percent and Allen gathers $10,000 from cash sales and deposit the money into his U.S. National Bank checking account, then the change in the U.S. money supply should be Answers: A. No change B. A $4,000 increase C. A $15,000 increase D. A $25,000 increase
28) If the required reserve ratio is 10% and the Federal Reserve purchases $50 million in treasury bonds on the open market, how could the money supply be impacted? a) Increase by a maximum amount of $500 million b) Increase by a maximum amount of $50 million c) Decrease by a maximum amount of $500 million d) Decrease by a maximum amount of $50 million 29) What is the most likely outcome of expansionary monetary policy? a) A decrease in the quantity of money, higher interest rates, and increased aggregate demand. b) An increase in the quantity of money, higher interest rates, and increased aggregate demand. c) A decrease in the quantity of money, lower interest rates, and decreased aggregate demand.. d) An increase in the quantity of money, lower interest rates, and increased aggregate demand.
Suppose that the T-account for First California Bank is as follows. The required reserve ratio is 10%. Suppose that the Fed buys $20,000 securities from First California Bank. As a result of the Fed’s purchase of $20,000 securities from First California Bank, how much of money supply will change? Is the change in money supply an increase or a decrease?
You are given the following information: Bank deposits (D) 350 Currency-to-deposits ratio (c) 0.20 Required reserve ratio (rr) 0.15 Solve for the monetary base level (B) in this economy. Solve for the level of bank reserves (R) in this economy. Solve for the money supply level (M) in this economy. Suppose there is a sudden rise in the currency-to-deposits ratio, from the original level of 0.2 to a new level of 0.4. If everything else remains unchanged, find the level of monetary base needed to keep money supply fixed at the level you solved for in part c. Continue to consider c=0.4. Find the level of required reserve ratio needed to keep the monetary base and the money supply fixed at the level you solved or in parts a and c, respectively.
Discuss how a decrease in the required reserve ration increases the money supply.
Currently, the Fed does not have complete control of the money supply because the Congress and the Treasury can also make changes to the money supply. government bonds may not be available for purchase when the Fed wants to perform OMO. the Fed does not know where all the U.S. currency is located. the amount of money in the real economy depends on the behavior of depositors and bankers. All of the above are correct.
6. a) UK currency is a commercial bank liability b) UK currency is a Bank of England liability c) UK currency is a central bank asset 9. The neutrality of money refers to the idea that a) a change in money supply has no impact on output over any time period b) a change in money supply has no short run impact on output c) the real quantity of money is constant in the long term
If the reserve requirement is 25%, then a $500 increase in deposits means that the money supply has the potential to increase by $125. will increase by $2,000. will increase by $125. has the potential to increase by $2,000.
The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does not want to hold excess reserves and the public does not want to hold any currency. By how much will the Money Supply ultimately rise? $6000 $3000 $5000 $4000
If the central bank sells $500 in bonds to a bank that has issued $10000 in loans and is exactly meeting the reserve requirement of 10%, what will happen to the amount of loans and to the money supply in general?
Suppose that you find $100 dollars and you deposit it into your bank account as a checkable deposit. If the require reserve ratio is 20%, how much will the money supply increase due to the initial $100 deposit in the banking system.