Chorlton, Fenella and O'Reilly are the sole inhabitants of Cosgrove. Their total holdings of $600 betweenthem constitute the only currency in circulation; this doesn't change in any of the questions below.6. On Monday O'Reilly pays Chorlton $30 for some sweets; Chorlton buys shampoo that Fenella manufacturesfor $15; Fenella buys a broom from O'Reilly for $75. What is the velocity of money V on Monday?7. On Tuesday Chorlton buys nothing; Chorlton makes a quiche and sells it to O'Reilly for $35; Fenella buyssnails from O’Reilly. If the velocity of money V is equal to 0.25 on Tuesday, how much did Fenella payO'Reilly for the snails?P8. The Cosgrove Statistical Agency calculates that the overall inflation rate, i.e. 7 =was 10% betweenMonday and Tuesday. What is the implied growth rate of Y,i.e.between Monday and Tuesday?

6. The velocity is given by, V=TransactionMoney Supply=30+15+75600=120600=0.2 7.If the amount was X,…

Chorlton, Fenella and O’Reilly are the sole inhabitants of Cosgrove. Their total holdings of $600 between them constitute the only currency in circulation; this doesn't change in any of the questions below. 6. On Monday O’Reilly pays Chorlton $30 for some sweets; Chorlton buys shampoo that Fenella manufactures for $15; Fenella buys a broom from O'Reilly for $75. What is the velocity of money on Monday? 7. On Tuesday Chorlton buys nothing; Chorlton makes a quiche and sells it to O'Reilly for $35; Fenella buys snails from O’Reilly. If the velocity of money V is equal to 0.25 on Tuesday, how much did Fenella pay O'Reilly for the snails? 8. The Cosgrove Statistical Agency calculates that the overall inflation rate, i.e. 7 = 5, was 10% between Monday and Tuesday. What is the implied growth rate of Y, i.e. g= = ¥, between Monday and Tuesday?

Chorlton, Fenella and O’Reilly are the sole inhabitants of Cosgrove. Their total holdings of $600 between them constitute the only currency in circulation; this doesn't change in any of the questions below. 6. On Monday O’Reilly pays Chorlton $30 for some sweets; Chorlton buys shampoo that Fenella manufactures for $15; Fenella buys a broom from O'Reilly for $75. What is the velocity of money on Monday? 7. On Tuesday Chorlton buys nothing; Chorlton makes a quiche and sells it to O'Reilly for $35; Fenella buys snails from O’Reilly. If the velocity of money V is equal to 0.25 on Tuesday, how much did Fenella pay O'Reilly for the snails? 8. The Cosgrove Statistical Agency calculates that the overall inflation rate, i.e. 7 = 5, was 10% between Monday and Tuesday. What is the implied growth rate of Y, i.e. g= = ¥, between Monday and Tuesday?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the reserve requirement is 8% and a new deposit of $900 billion is made into the banking system. Create T accounts to analyze the following questions. a) Initially, reserves would increase by? b) Required reserves would increase by? c) Excess reserves would increase by? d) The first round of loans would amount to? e) The second round of loans would amount to approximately? f) The third round of loans would amount to approximately? g) For the entire macroeconomy, after the infinite rounds of loans were taken into account, money supply would increase by? h) If the Federal Reserve bought bonds worth $600 billion, money supply would increase by? i) If the Federal Reserve sold bonds worth $600 billion, money supply would decrease by?
Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 8.04% and ϕ = 4.15%. b. Charges a 0.26 percent loan origination fee to the borrower. c. Imposes a 14 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 9 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan. Note: Convert your answer to percentage format. Enter your answer rounded to 2 decimals, and without any units. So, for example, if your answer is 3.4568%, then just enter 3.46.
One of the major functions of commercial banks is credit creation. Commercial banks create credit by advancing loans and purchasing securities. They lend money to individuals and businesses out of deposits accepted from the public. Commercial banks have to maintain a specified percentage of their deposits as liquidity which is set by the central bank. This reserve requirement controls the extent to which commercial banks can grow money in the economy. Assuming you only have one commercial bank in your economy, a reserve requirement of 20% and an initial deposit of 200. REQUIRED: A. Show for the first four days and the last day the balance sheet of your commercial bank.
Let’s assume that the nominal Gross Domestic Product, GDP, of a hypothetical country is $45,000 and that the velocity of money of this country is 5. This implies that the money supply, in this country, is:
Suppose total deposits increase by $4,000 after all rounds of the money-creation process when the Fed buys $1,000 worth of U.S. government securities. This implies that the maximum value of the required reserve ratio is: A. 4. B. 0.20. © 0.25. D. 0.33 E. 3.
Suppose that you deposit $8,000 in your bank and the required reserve ratio is 15 percent. The maximum loan your bank can make as a direct result of your deposit is: (enter a whole number)
7. For each of the following statements, indicate whether it is correct by checking the appropriate box:a) A decrease in the legal cash flow coefficient (θ) allows commercial banks to grant more loans on the basis of the same amount of deposits, leading to an increase in the value of the money multiplier and therefore in the money supply in circulation in the economy;b) When the Central Bank conducts an open market operation, consisting of the purchase of Treasury bills, the money supply in circulation in the economy increases, all other things being equal;c) If the fraction of the money supply held in the form of fiat money is 25%, and if the legal tender coefficient (θ) is 20%, then the money multiplier is 2.5;(d) If the fraction of the money supply held in the form of currency is 20% and the legal cash flow coefficient is 25%, then the money multiplier is 2.5 ;e) None of the above statements is correct.
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Suppose Alice withdraws $10,000 from her savings account to purchase shares in a money market mutual fund. Alice's action will cause _______ in the M1 money supply and _______ in the M2 money supply, everything else held constant. Select one: an increase; no change an increase; a decrease a decrease; no change a decrease; an increase
Assume we have an economy in which banks would hold 25% of their deposits as reserves. Initially, deposits are $7,000 and currency is $1,000. Now the central bank purchases $500 of bonds from the public, using new currency. a) Illustrate the first three rounds of deposit creation, assuming that public would like to continue to hold $1,000 of currency. PLEASE incorporate the fact that the central bank purchases $500 of bonds from the public, using new currency. b) What will money supply ultimately be in this case? c) Repeat the analysis in (a), but now assume that the public would like to hold a constant ratio of currency to deposits. Briefly explain why the two results are different.
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42) An open-market purchase of securities by the Bank of England results in ________ in reserves and ________ in the supply of money. A) an increase; an increase B) a decease; an increase C) an increase; a decrease D) a decrease; a decrease