(question has three parts below)In Gainesville, people hold $1,000 of currency and $4,000 of demand deposits in the only bank, Gatorbank. The reserve–deposit ratio is 0.25.What are the money supply, the monetary base, and the money multiplier?Assume that Gatorbank is a simple bank: it takes in deposits, makes loans, and has no capital. Show Gatorbank’s balance sheet. What value of loans does the bank have outstanding?Gatorbank’s central bank wants to increase the money supply by 10 percent. Should it buy or sell government bonds in open-market operations? Assuming no change in the money multiplier, calculate, in dollars, how much central bank needs to transact.

1. Given:Currency=$1000Demand deposits=$4000Reserve-deposit ratio= 0.25 Money…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(question has three parts below)

In Gainesville, people hold $1,000 of currency and $4,000 of demand deposits in the only bank, Gatorbank. The reserve–deposit ratio is 0.25.

What are the money supply, the monetary base, and the money multiplier?
Assume that Gatorbank is a simple bank: it takes in deposits, makes loans, and has no capital. Show Gatorbank’s balance sheet. What value of loans does the bank have outstanding?
Gatorbank’s central bank wants to increase the money supply by 10 percent. Should it buy or sell government bonds in open-market operations? Assuming no change in the money multiplier, calculate, in dollars, how much central bank needs to transact.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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