Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
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Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
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- Assume the Fed sells $32,140 worth of U.S. Treasury bonds to the First National Bank. Assuming that the required reserve ratio is 10.5 percent, then the money supply in the economy will ultimately: decrease by a maximum of $32,140. decrease by a maximum of $28,765. decrease by a maximum of $257,120. decrease by a maximum of $306,095. decrease by a maximum of $273,955.Suppose that you find $100 dollars and you deposit it into your bank account as a checkable deposit. If the require reserve ratio is 20%, how much will the money supply increase due to the initial $100 deposit in the banking system.Suppose that the central bank has increased the money supply such that there is an additional $989699 in excess reserves. If the reserve ratio is 4.0 percent, what is the maximum increase in money supply? Round your answer to the nearest dollar.
- Suppose the money supply is currently $500 billion and the Fed wishes to increases it by $100 billion. Given a required reserve ration of 0.25, what should it do? If it decided to change the money supply by changing the required reserve ratio, what change should it make? Why may the Fed be reluctant to change the reserve requirement?The graph shows the demand curve for reserves in the market for bank reserves. 8.00- Federal funds rate (percent per year) The federal funds target rate is 4 percent. Draw the supply of reserves curve determined by the Fed to achieve the federal funds target rate. Label it. 7.00- Draw a point at the equilibrium in the market for bank reserves. 6.00- 5.00- 4.00- 3.00- 2.00- 0 25 50 75 RD 100 Reserves on deposit at the Fed (billions of dollars) >>> Draw only the objects specified in the question. ☑Suppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. 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? Banks choose to loan out all excess reserves. 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. All money loaned out is deposited back into the banking system.
- To counter the economic disruption resulting from the 2020 pandemic, the Federal Reserve reduced the commercial bank reserve requirement to 0% instead of 10% in 2019. Please discuss how this Federal Reserve action supported the economic recovery from the pandemic and affected the money supply. In addition, the Federal Reserve started buying monthly $80 billion of US Treasury bonds and $40 billion of Mortgage Backed Securities. Please discuss how this Federal Reserve action supported the economic recovery from the pandemic and affected the money supply and yields/interest rates.If the Fed lowers the discount rate by half of a percentage point, it will, of course, encourage banks to borrow $12 million more than usual from the Fed. Assuming a 10 percent reserve requirement, how much the money supply would increase?Suppose banks increase excess reserves by $574,207. If the reserve ratio is 6%, what is the maximum increase in the money supply?
- 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. Use a balance sheet to show the impact on the bank’s loans. Consider the money multiplier and assume the required reserve ratio is 10 percent. What is the maximum increase in the money supply that can result from this open market transaction?Suppose your grandma sends you $100 for your birthday and you deposit that $100 into your checking account at the local bank. The reserve ratio is 10%. Based upon this deposit, how much have the bank's reserves have increased by and how much have the bank's checkable deposits have increased by?BUSN5 CH2 WKSMultiple ChoiceIdentify the choice that best completes the statement or answers the question.1. Define economics.a) a financial and social systemb) the study of a countryâs overall economic issuesc) the integration between consumers, families, and businessesd) the study of the choices that different entities make in allocating resources2. Macroeconomics focuses ona) the major issues facing the national economy, but has little or no relevance to individuals.b) smaller economic units such as individual consumers, families, and individual businesses operating within the economy.c) the major issues facing the national economy that may seem abstract, but directly affect an individualâs day-to-day life. d) the role of government, while microeconomics focuses on the private sector.3. After the collapse of the dot com bubble and the 9/11 terrorist attacks, the stock market depreciated and unemployment increased leading many to fear that the…