Assume the banking system contains the following amounts. Use this information to answer five questions.Total reserves$90 billionTransactions deposits$900 billionCash held by public$100 billionReserve requirement0.10Instructions: Enter your responses as a whole number.a. Are the banks fully utilizing their lending capacity?esO YesO Nob. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions aO No changeO Decrease by $20 billionIncrease by $20 billionO More information is needed c. What would the lending capacity of the banking system be after this deposit?billiond. How large would the money supply be if the banks fully utilized their lending capacity?billione. What three policy tools could the Fed use to offset that potential growth in M1?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once toplace a check mark. For incorrect answer(s), click the option twice to empty the box.Lower the reserveRaise the discount raterequirementRaise the reserve7 Conduct open market salesrequirementConduct open marketpurchasesLower the discount rate

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Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change Decrease by $20 bllion Increase by $20 billion More information is needed

Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change Decrease by $20 bllion Increase by $20 billion More information is needed

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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23. What are the 3 major instruments that central banks can useto control money supply? Short answer
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Assume a banking system where all banks hold target levels of reserves and there is a currency drain. Which of the following would reduce the deposit multiplier? i) Households choose to hold more of their cash outside of banks ii) Banks reduce their target reserves ratio ii) Banks increase their target reserves ratio O a. only i O b. i and ii Oc. i and iii O d. None of the answers offered are accurate O e. only ii
Saved There is a reserve requirement of 23 percent in the United States. If the Federal Reserve makes an open market purchase of $23 million, the money supply will Multiple Choice Graw Hill decrease by $100 million. increase by $529 million. decrease by $529 million. increase by $100 million. 1 ! 87 & R T Y U ( 8 9 1 0 0 D F G H J K
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