Macmillan Learning Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve requirement is 10%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: S 24750 Incorrect Which events could cause the increase in the money supply to be less than its potential? All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks.

Macmillan Learning Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve requirement is 10%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: S 24750 Incorrect Which events could cause the increase in the money supply to be less than its potential? All money loaned out is deposited back into the banking system. Banks decide to keep some excess reserves on hand. Banks choose to loan out all excess reserves. Some loan recipients choose to hold some cash instead of depositing all of it in banks.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 1: MS Interest Rate (%) 5% MD 150 Money (S million) 21. Refer to Figure 1. At an interest rate of 4%, there is a: a) excess demand for money and the interest rate will decline. b) excess demand for money and the interest rate will rise. c) excess supply of money and the interest rate will decline. d) excess supply of money and the interest rate will rise.
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Jamie made a cash deposit to her checking account. This resulted in an increase in the money supply of $23,000. The reserve requirement is 4%, and all banks keep excess reserves equal to 4% of checking deposits. What was the amount of Jamie's deposit? A. $1.840 B. $2,000 C. $920 D. $1,000
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Suppose the bank expects interest rates to rise which would impact the value of theirgovernment bonds. Suppose the price of the 10 year Treasury bonds is expected tochange by 6%. Would this cause a problem for the bank? Why or why not?
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8. Study Questions and Problems #8 Suppose the Federal Reserve's trading desk buys $500,000 in T-bills from a securities dealer, who then deposits the Fed's check in Best National Bank. Assuming that the required reserve ratio is 5%, complete the following table by showing changes in Best National Bank's balance sheet. Best National Bank Assets (Dollars) Reserves: Addendum: Changes in Reserves Actual reserves Required reserves Excess reserves Liabilities (Dollars) Checking deposits: Total liabilities Consider the money multiplier. The maximum increase in the money supply that can result from this open market transaction is
8. The reserve requirement, open market operations, and the money supply 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 $400. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 20 10 A higher reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Maintain the assumption that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%,…
23. Identify the four major methods the Fed uses to control the money supply. Give two examples of situations in which the Fed might use one of these methods and explain why that method is best for the given situation.
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-The Golden State Bank has total cash reserves of $110,000, deposits of $200,000, and loans of $90,000. The reserve requirement is 5 percent. This bank can make additional loans up to the amount of: $10,000 $5,500 $100,000 $190,000