Federal Funds Rate 4 3.5 3 2.5 2 1.5 " S D 1 150 200 250 300 350 Quantity of Reserves IOR (interest on reserves). ON RRP (reverse REPO rate) Refer to the figure below: Price Level (average price) a Gap AD Excess AD AD 5.8 6.0 6.2 Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.65, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion. c. A cut in income transfers $ billion

Round Deposits Required Reserves of 20% Excess Reserves New Loans 50% of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100.00 $400.00 $400.00 $200.00 $200.00 2 $200 $40 $160 $160 $80 $80 3 $80 $16 $64 $64 $32 $32 4 $32 $6.40 $25.60 $25.60 $12.80 $12.80 5 $12.80 $2.56 $10.24 $10.24 $5.12 $5.12 6 $5.12 $1.02 $4.10 $4.10 $2.05 $2.05 7 $2.05 $.41 $1.64 $1.64 $.82 $.82 8 $.82 $.16 $.66 $.66 $.33 $.33 9 $.33 $.07 $.26 $.26 $.13 $.13 10 $.13 $.03 $.10 $.10 $.05 $.05 Totals $833.25 $166.65 $666.60 $666.60 $333.30 $333.30   Calculate the new money supply.   Calculate the money multiplier.

rrr

Round Deposits Required Reserves of 20% Excess Reserves New Loans None of loan proceeds are held as currency in circulation by people Loan proceeds redeposited 1 $500 $100 $400 $400 0 $400 2 $400 $80 $320 $320 0 $320 3 $320 $64 $256 $256 0 $256 4 $256 $51.20 $204.80 $204.80 0 $204.80 5 $204.80 $40.96 $163.84 $163.84 0 $163.84 6 $163.84 $32.77 $131.07 $131.07 0 $131.07 7 $131.07 $26.21 $104.86 $104.86 0 $104.86 8 $104.86 $20.97 $83.89 $83.89 0 $83.89 9 $83.89 $16.78 $67.11 $67.11 0 $67.11 10 $67.11 $13.42 $53.69 $53.69 0 $53.69 Totals $2231.57 $417.31 $1785.26 $1785.26 0 $1785.26   Calculate the new money supply. (Enter response here.)   Calculate the money multiplier.

1. A bank is offering to sell four-month certificates of deposit for $ 4,926. At the end of four months, the bank will pay $5,000 to the certificate owner. Based on a four-month interest period: a) What is the interest rate the bank is paying you? b) What are the nominal and effective interest rates on this certificate of deposit?

Illustrate how the Cash Balances change over time?

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If Tiffany redeemed a bond that earned 5% interest over the past 10 years, which function of money was BEST represented in this scenario? A. medium of exchange B. store of value C. standard of value D. unit of account

13. You signed a 15-year interest swap with annual payments to pay fixed and receive floating. The quote was 4.5-4.7% against LIBOR flat. The principal is 100,000. What is the value of the swap 5 years later if the 15-Y LIBOR is 2% and the 10-Y LIBOR is 3%? (please use a fixed rate to discount the cash flows.) Round to the nearest US cent (2 decimal places).