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The central bank buys $3,000 worth of bonds in the open market from JMH Bank. The required reserve ratio is 20%. (a) Immediately after the central bank's open-market bond purchase, will JMH Bank's liabilities increase, decrease, or stay the same? Explain. (b) By what amount will JMH Bank's reserves change before any new loans are made? Explain. (c) As a result of the central bank's open-market purchase of bonds, what is the dollar value of the

The central bank buys $3,000 worth of bonds in the open market from JMH Bank. The required reserve ratio is 20%. (a) Immediately after the central bank's open-market bond purchase, will JMH Bank's liabilities increase, decrease, or stay the same? Explain. (b) By what amount will JMH Bank's reserves change before any new loans are made? Explain. (c) As a result of the central bank's open-market purchase of bonds, what is the dollar value of the

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at your final answer. The central bank buys $3,000 worth of bonds in the open market from JMH Bank. The required reserve ratio is 20%. (a) Immediately after the central bank's open-market bond purchase, will JMH Bank's liabilities increase, decrease, or stay the same? Explain. (b) By what amount will JMH Bank's reserves change before any new loans are made? Explain. (c) As a result of the central bank's open-market purchase of bonds, what is the dollar value of the Capyrighe C 2021. The College lleand. Thee materials are part of a Colloge ourd progran. Ueor disaribution af thee matarials celineor ia priat beyond your Page I of 2 dhoal's participation in the pragram i prahibied AP CollegeBoard AP Macroeconomics Test Booklet Banking maximum amount of new loans JMH Bank can make? Explain. (d) Calculate the maximum amount by which the money supply can change throughout the banking system. Show your work. (e) How will the change in the money supply in part (d) affect consumption spending and real GDP in the short run? Explain. Please respond on separate paper, following directions from your teacher.
Transcribed Image Text:2. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at your final answer. The central bank buys $3,000 worth of bonds in the open market from JMH Bank. The required reserve ratio is 20%. (a) Immediately after the central bank's open-market bond purchase, will JMH Bank's liabilities increase, decrease, or stay the same? Explain. (b) By what amount will JMH Bank's reserves change before any new loans are made? Explain. (c) As a result of the central bank's open-market purchase of bonds, what is the dollar value of the Capyrighe C 2021. The College lleand. Thee materials are part of a Colloge ourd progran. Ueor disaribution af thee matarials celineor ia priat beyond your Page I of 2 dhoal's participation in the pragram i prahibied AP CollegeBoard AP Macroeconomics Test Booklet Banking maximum amount of new loans JMH Bank can make? Explain. (d) Calculate the maximum amount by which the money supply can change throughout the banking system. Show your work. (e) How will the change in the money supply in part (d) affect consumption spending and real GDP in the short run? Explain. Please respond on separate paper, following directions from your teacher.
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