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 b 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 Gold $ 700 100 200 Total assets $1000 and the commercial banks' balance sheet is Consolidated Balance Sheet of Banks Assets Liabilities $ 100 200 2700 $3000 Vault cash Deposits $3000 Reserve deposits Loans Total assets Total liabilities $3000 f 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 ncorrectly, 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 delet 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 from vour answer, i.e, "-999.99".
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 b 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 Gold $ 700 100 200 Total assets $1000 and the commercial banks' balance sheet is Consolidated Balance Sheet of Banks Assets Liabilities $ 100 200 2700 $3000 Vault cash Deposits $3000 Reserve deposits Loans Total assets Total liabilities $3000 f 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 ncorrectly, 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 delet 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 from vour answer, i.e, "-999.99".
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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
Securities
Gold
$ 900
$ 700
Currency held by nonbank public
Vault cash held by banks
Reserve deposits
100
100
200
Total assets
$1000
Total liabilities
$1000
and the commercial banks' balance sheet is
Consolidated Balance Sheet of Banks
Assets
Liabilities
$3000
$ 100
200
Vault cash
Deposits
Reserve deposits
Loans
2700
Total assets
$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"
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