Assume the Fed sells $32,140 worth of U.S. Treasury bonds to the First National Bank. Assumingthat the required reserve ratio is 10.5 percent, then the money supply in the economy willultimately:decrease by a maximum of $32,140.decrease by a maximum of $28,765.decrease by a maximum of $257,120.decrease by a maximum of $306,095.decrease by a maximum of $273,955.

Required reserve ratio is 10.5 % Money multiplier = 1 / Required reserve ratio => Money…

Assume the Fed sells $32,140 worth of U.S. Treasury bonds to the First National Bank. that the required reserve ratio is 10.5 percent, then the money supply in the economy will ultimately: O decrease by a maximum of $32,140. O decrease by a maximum of $28,765. decrease by a maximum of $257,120. decrease by a maximum of $306,095. decrease by a maximum of $273,955.

Assume the Fed sells $32,140 worth of U.S. Treasury bonds to the First National Bank. that the required reserve ratio is 10.5 percent, then the money supply in the economy will ultimately: O decrease by a maximum of $32,140. O decrease by a maximum of $28,765. decrease by a maximum of $257,120. decrease by a maximum of $306,095. decrease by a maximum of $273,955.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

8. The reserve requirement, open market operations, and the moneysupply Consider a system of banking in which the Federal Reserve uses required reserves to control the money supply (as was the case in the United States before 2008). Assume that banks do not hold excess reserves and that households do not hold currency, so the only money exists in the form of demand deposits. To further simplify, assume the banking system has total reserves of $100. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 15 10 Simple Money Multiplier A lower reserve requirement is associated with a Money Supply ollars) money supply. Suppose the Federal Reserve wants to increase the money supply by $100. Maintain the assumption that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth $ of U.S. government…
Assume that banks lend out all their excess reserves and individuals deposit all their money. If the Required Reserve Ratio is .20, what does the Fed have to do to decrease the supply of money by $300 billion? Select one: a. Sell $60 billion worth of government bonds to commercial banks b. Sell $80 billion worth of government bonds to commercial banks c. Sell $200 billion worth of government bonds to commercial banks d. Buy $100 billion worth of government bonds from commercial banks e. Buy $60 billion worth of government bonds from commercial banks
Assume the reserve ratio is 25 percent and there are $40,000 in new deposits in the banking system. As a result, the money-creating potential of the commercial banking system: Hint: Calculate the Monetary Multiplier using reserve requirement ratio= 25% O is $40,000. is $160,000. O is $200.000. is $120,000.
The reserve requirement is 10%. Suppose that the Fed purchases $50,000 worth of U.S. government securities from a bond dealer, electronically crediting the dealer's deposit account at Reliable Bank. Which of the following correctly describes the immediate effect of this transaction? A. The required reserves of Reliable Bank increase by $50,000. B. The total reserves of Reliable Bank increase by $50,000. C. Reliable Bank can make $50,000 in new loans. D. The excess reserves of Reliable Bank increase by $50,000. -ம்
N7 2. Show 3 rounds of deposits, starting with a $2000 deposit into a checking account at bank A. Assume the required reserve rate is 5% . a. Show the effect at bank A b. Show the effect at bank B C. Show the effect at bank C d. What will be the total increase to the money supply?
The current Required Reserve Ratio is 10% and Bank A sold a treasury bill to the Federal Reserve to increase it excess reserve by $100. With this additional $100 in Excess Reserve to Bank A, the Money Supply could potentially grow by an amount of _____ Multiple Choice $500 $1,000 $100 Changing the Excess Reserves does not change the money supply
If the Fed sells the U.S. $200 million in government bonds, the total money supply will: O not change. decrease by more than $200 million. O decrease by less than $200 million but more than $0 million. O decrease by exactly $200 million.
Suppose Robina Bank receives a deposit of $53,589 and the reserve requirement is 3%. Answer the questions using this information. Round your answers to two decimal places. What is the amount that Robina Bank must keep on hand as required by the Federal Reserve (Fed)? What is the amount that Robina Bank must have in excess reserves from this initial deposit? What is the total change in the M1 money supply from this one deposit? keep on hand: $ excess reserves: $ total change: $ Activate Windows 11:01 PM
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: a) the money supply by the whole banking system can increase by $1,000. b) the money supply by the whole banking system can increase by $4,000. c) the money supply by the whole banking system can increase by $8,000.
1.If you deposit $100 in a bank account and the reserve ratio is 20 percent. a.What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? b.lf the fed raises the required reserve ratio to 30 percent. What is the minimum amount of money banks will be required to keep in reserves? How much loans can banks make at most? What is the money multiplier? How much money can be created from $100 of reserves? N
If a bank gets $100 in new reserves from the Fed and the required-reserve ratio is 0.2, then the O rate of interest falls in the economy O money supply grows by $500 O money multiplier is 5 O all of the above
Asap