QUESTION 2 Suppose that for every open-market operation in the amount of $1, money supply increases by $3, i.e., an open-market purchase of $1 will increase money supply by $3 and an open-market sale of $1 will reduce money supply by $3. This means that money multiplier is fixed and is equal to 3. The Fed's balance sheet is Federal Reserve Bank Assets Liabilities $ 900 Currency held by nonbank public 100 Vault cash held by banks Reserve deposits $1000 Total liabilities Securities $ 700 100 Gold 200 $1000 Total assets and the commercial banks' balance sheet is Consolidated Balance Sheet of Banks Assets Liabilities $ 100 Deposits $3000 Vault cash Reserve deposits Loans Total assets 200 2700 $3000 Total liabilities $3000 If the Fed wants to increase money supply by 15%, then it has to buy government bonds in the amount of Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99". 185.00
QUESTION 2 Suppose that for every open-market operation in the amount of $1, money supply increases by $3, i.e., an open-market purchase of $1 will increase money supply by $3 and an open-market sale of $1 will reduce money supply by $3. This means that money multiplier is fixed and is equal to 3. The Fed's balance sheet is Federal Reserve Bank Assets Liabilities $ 900 Currency held by nonbank public 100 Vault cash held by banks Reserve deposits $1000 Total liabilities Securities $ 700 100 Gold 200 $1000 Total assets and the commercial banks' balance sheet is Consolidated Balance Sheet of Banks Assets Liabilities $ 100 Deposits $3000 Vault cash Reserve deposits Loans Total assets 200 2700 $3000 Total liabilities $3000 If the Fed wants to increase money supply by 15%, then it has to buy government bonds in the amount of Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99". 185.00
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 18CQ
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