Scenario: Assets and Liabilities of the Banking System Scenario: Assets and Liabilities of the Banking System Assets Liabilities Loans Deposits $1,000,000 $900,000 100,000 Reserves Suppose that the required reserve ratio is 10%, and the Fed buys $25,000 worth of U.S. Treasury bills from the banking system. If the banking system does NOT want to hold any excess reserves, will be added to the money supply. $1 million about $667,000 $250,000 about $111,000

Scenario: Assets and Liabilities of the Banking System Scenario: Assets and Liabilities of the Banking System Assets Liabilities Loans Deposits $1,000,000 $900,000 100,000 Reserves Suppose that the required reserve ratio is 10%, and the Fed buys $25,000 worth of U.S. Treasury bills from the banking system. If the banking system does NOT want to hold any excess reserves, will be added to the money supply. $1 million about $667,000 $250,000 about $111,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Scenario: Assets and Liabilities of the Banking System
Scenario: Assets and Liabilities of the Banking System
Assets
Liabilities
Loans
Deposits
$1,000,000
$900,000
100,000
Reserves
Suppose that the required reserve ratio is 10%, and the Fed buys $25,000 worth of U.S. Treasury bills from the banking
system. If the banking system does NOT want to hold any excess reserves,
will be added to the money supply.
$1 million
about $667,000
$250,000
about $111,000

(Figure: Consumption and Real GDP) Use Figure: Consumption and Real GDP. The marginal propensity to consume is:
Consumption
per period
(trillions of
dollars)
Consumption
$6
5
4
3
2
1
I
I
0 1
2
3
4 5 6 7 8 9 10
Real GDP per period = disposable
personal incom per period (trillions of dollars)
0.5.
1.0.
2.0.
0.
ܢܘ

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