In 2007-08, the financial crisis led money multiplier to and the money supply to which would cause the excess reserves ratio to and depositors are likely to their holdings of currency. O decrease; decrease; increase; increase O increase; increase: decrease: decrease: decrease; increase; decrease; increase; increasc; decrease; increase; decrease;

In 2007-08, the financial crisis led money multiplier to and the money supply to which would cause the excess reserves ratio to and depositors are likely to their holdings of currency. O decrease; decrease; increase; increase O increase; increase: decrease: decrease: decrease; increase; decrease; increase; increasc; decrease; increase; decrease;

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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13. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000If the Bank of Canada requires banks to hold 5 percent of deposits asreserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
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7. The government of Eastlandia uses measures of mon- etary aggregates similar to those used by the United States, and the central bank of Eastlandia imposes a required reserve ratio of 10%. Given the following infor- mation, answer the questions below. Bank deposits at the central bank = $200 million Currency held by public = $150 million Currency in bank vaults = $100 million %3D
Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? O A. An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier OB. An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier OC. Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. OD. Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.
HIS Dal al 2. How would a decrease in the reserve requirement affect the (a) size of the money multiplier, (b) amount of excess reserves in the banking system, and (c) extent to which the system could expand the money supply through the creation of checkable deposits via loans?
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True or False:,1. Economists are not completely in agreement on what constitutes money for all purposes.,2. People use nontransaction accounts primarily because they generally pay higher interest rates than transaction deposits.,3. Most purists would argue that nontransaction deposits are near money assets but not money itself, because they are not a direct medium of exchange.,4. Liquidity refers to the ease with which one asset can be converted into another asset or goods and services.,5. Money market mutual funds have experienced tremendous growth over the last 20 years, but they are not highly liquid assets.,6. M1 is substantially larger than M2.,7. M1 includes currency, checkable deposits, and traveler’s checks, but not savings accounts.,8. People prefer to keep the bulk of their liquid assets as currency or in transaction accounts rather than in the form of savings accounts of various kinds.
1.5 Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason? Ippos Is transfer on MI and M2? red resent SAVALDAVATY A 100 000 of curre urrency
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Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the (economy-wide) currency ratio, carefully following all numeric instructions. Do not convert the ratio into percent. In other words, if you get k of 0.99, enter only 0.99 in the blank.
The money stock measured as M1 is growing at the rate of 5% per year. If real GDP is growing at 2% per year, and the income velocity of circulation of money is constant, Select one: the economy will achieve noninflationary growth O b. the inflation rate will be around 1%. O c. the inflation rate will be around 5% O d. the inflation rate will be around 3%.
What is the ratio of reserves to deposits that a bank finds prudent to hold? Describe the situation in which a bank has $10 million in actual reserves and $8 million in desired reserves. The ratio of reserves to deposits that a bank finds prudent to hold is its _______. When a bank has $10 million in actual reserves and $8 million in desired reserves, it has _______. A. desired deposit ratio; a shortage of deposits B. desired reserve ratio; surplus reserves C. desired reserve ratio; insufficient reserves D. planned reserve ratio; a currency drain