Refer to the News Wire to answer two questions.NEWS WIRE: RESERVE REQUIREMENTSChina Cuts Reserve RequirementsBeijing-China's central bank reduced the amount of reservescommercial banks are required to hold, freeing up money for lendingin the latest easing measure to shore up the world's second-largesteconomy.The People's Bank of China's percentage point cut in the reserverequirement lowers the reserve-requirement ratio, or RRR, to 11.5percent for large banks. The move frees up about US$79 billion inadditional funds that banks can now lend.Source: News accounts of March 2020.Instructions: Round your responses to one decimal place.What was the money multiplier in Chinaa. before the change in reserve requirements?8.6956b. after the change in reserve requirements?

Detailed Explanation: First, we need to understand what the money multiplier is. The money…

Answered: Refer to the News Wire to answer two…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 12PA

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Beijing—China's central bank reduced the amount of reserves commercial banks are required to hold, freeing up money for lending in the latest easing measure to shore up the world's second-largest economy. The People's Bank of China's percentage point cut in the reserve requirement lowers the reserve-requirement ratio, or RRR, to 11.5 percent for large banks. The move frees up about US$79 billion in additional funds that banks can now lend. by how much did excess reserves in China increase and by how much did the lending capacity of Chinese banks increase as a result?
The reserve requirement is 25%, and the banking system receives a new $1,000 deposit. The bank does not want to hold excess reserves and the public does not want to hold any currency. By how much will the Money Supply ultimately rise? $6000 $3000 $5000 $4000
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: $ 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 choose to loan out all excess reserves. SEL Some loan recipients choose to hold some cash instead of depositing all of it in banks. Banks decide to keep some excess reserves on hand. C Z MODE PAYLA I topm PEDRULESTAN SVETE D P Activate Windows Salto Settings to activate Windows
Commercial banks have a target reserve ratio of 30 percent and there is a cash drain of 20 percent. If the Central Bank issues an additional 12 dollars of currency the money supply will increase by _____________ dollars.
None
Some individuals have suggested raising the required reserve ratio for banks to 100 percent in a limited reserve banking system. a. What would the money multiplier be if this change was made? Assume people hold no cash. Instructions: Enter your response as a whole number. b. What effect would such a change have on the money supply? The money supply would decrease c. How could that effect be offset? By a decrease in government spending By an increase in government spending By an increase in taxes
If the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired from your parents’ bank account in Germany to your checking account in the U.S. National Bank, then the change in the U.S. money supply eventually should be Group of answer choices a $45,000 increase. a $5,000 increase. no change. a $50,000 increase.
Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00%, and the Federal Reserve wants to increase the money supply by $60.00 million, the Fed would need to make an open market purchase of $ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 5.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a smaller open market purchase but a larger open market sale. B. a larger open market purchase but a smaller…
Fill in the blanks to make the following statements correct. a. Suppose the Bank of Canada purchases a $10,000 bond from Bob's Financial Firm, and Bob's deposits its cheque at the CIBC. This is a new deposit to the banking system and will allow the commercial banks to lend more b. If the CIBC has a target reserve ratio of 20 percent, it will keep $ 2000 as reserves and will lend $ 8000. c. Assuming there is no cash drain from the banking system, the ultimate effect is x$10,000 = $ in deposits in the banking system of a decrease an increase
The economy of Elmendyn contains 900 $1 bills. If people hold all money as currency, the quantity of money is . If people hold all money as demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold all money as demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is .
If a switch occurs from deposits into currency, whathappens to the federal funds rate? Use the supply anddemand analysis of the market for reserves to explainyour answer
Suppose the banks in an economy have a reserve-deposit ratio of 10 percent and the currencydeposit ratio is 20 percent.a. If the Central Bank increases the monetary base by $400 through open market operations, what will be the increase in the money supply?b. If the Central Bank increases the discount rate and firms react by increasing the reservedeposit ratio to 15 percent, what is the change in the multiplier? Will this change increase or decrease the money supply?

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