Suppose that:r = required reserve ratio = 0.10%3D%3DC = {C/D} = currency ratio = 0.45%3D%3D%3De = {ER/D} = excess reserve ratio = 0.05%3D%3DMB = the monetary base = $5,000 billion%3D1 +cGiven that the formula for the money multiplier isfind the value for M, the money supply.r+ e +CThe money supply is $billion. (Round your response to the nearest whole number.)Use the money multiplier to find the new value for the money supply if open market operations increase the monetary baseby $200 billion.The money supply is now $billion. (Round your response to the nearest whole number.)

Money multiplier explains the change in money supply with a change in the monetary base.

Answered: Suppose that: r = required reserve…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The reserve requirement, open market operations, and the money supply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is checkable deposits. To simplify the analysis, suppose the banking system has total reserves of $500. Determine the simple money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 5 10 A lower reserve requirement is associated with a ______(SMALLER/LARGER) money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to _____(BUY/SELL)$ ________ worth of U.S. government bonds. Now, suppose that, rather than…
Suppose a central bank has a required reserve ratio of 6.6% for all banks and the central bank changes reserves at one of these banks by $536. By how much will the money supply change, at most, after all the effects of the money multiplier? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
Suppose Robina Bank receives a deposit of $53,589 and the reserve requirement is 3%. Answer the questions using this information. Round your answers to two decimal places. What is the amount that Robina Bank must keep on hand as required by the Federal Reserve (Fed)? What is the amount that Robina Bank must have in excess reserves from this initial deposit? What is the total change in the M1 money supply from this one deposit? keep on hand: $ excess reserves: $ total change: $ Activate Windows 11:01 PM
Which of the following is a TRUE statement? Explain why. 1. If the currency drain is 20 percent, and the desired reserve ratio is 20 percent, the real-life money multiplier is 4. 2. If a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits, the real-life money multiplier is 4.
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.
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: a) the money supply by the whole banking system can increase by $1,000. b) the money supply by the whole banking system can increase by $4,000. c) the money supply by the whole banking system can increase by $8,000.
Suppose that the required reserve ratio is equal to 10%. If the currency-to-deposit ratio is fixed at 20%, what is the money multiplier? If the monetary base is $100 million, what is 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?
6. The simple money multiplier is given as = rr Question: Using the formula for the simple money multiplier, what is multiplier if the required reserve ratio is 15 %? If it is 12.5%?
Suppose the monetary base is $500 million, the required reserve ratio is 12%, and the currency-deposit ratio is 30%. What would the excess reserve ratio need to be to produce $800 million in the money supply. Holding everything else constant, what effect would an increase in the excess reserve ratio have on the money supply?
Suppose the monetary base is $100. If the currency-deposit ratio is 0.20 and the reserve-deposit ratio is 0.10, calculate the money multiplier and total money supply.

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