The money multiplier declined significantly during the period 1930-1933 and also during the recent financial crisis of2008-2010. Yet the M1 money supply decreased by 25% in the Depression period but increased by more than 20%during the recent financial crisis. What explains the difference in outcomes?A. The excess reserves ratio increased rapidly during the recent financial crisis.B. There was a minimal increase in the currency ratio during the recent financial crisis.C. There was a significant increase in the monetary base during the recent financial crisis.OD. The overall level of deposit expansion decreased during the recent financial crisis.

Money multiplier refers to the increase in the money supply in an economy resulting from an initial…

The money multiplier declined significantly during the period 1930-1933 and also during the recent financial crisis of 2008-2010. Yet the M1 money supply decreased by 25% in the Depression period but increased by more than 20% during the recent financial crisis. What explains the difference in outcomes?

The money multiplier declined significantly during the period 1930-1933 and also during the recent financial crisis of 2008-2010. Yet the M1 money supply decreased by 25% in the Depression period but increased by more than 20% during the recent financial crisis. What explains the difference in outcomes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Let's say that: rr = the reserve ratio = .85% %3D C = total currency in circulation = $1060B D = total checkable deposits =$1,800B ER = total excess reserves = $2080B %3D %3D M = money supply (M1) = C + D= $2860B %3D Derive, numerically, the money multiplier (m); given the above values.
Real-Time Data Analysis Exercise* *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The table shows the quantities of M1, M2, and their components in August 2022 but with two values missing and shown in the table as 0.0. What are the missing values? >>> Answer to the nearest 1 decimal place. Other liquid deposits are $ Demand deposits are $ billion. billion. C Measures and Components of Money in August 2022 M2 Money market funds Small time deposits M1 Demand deposits Other liquid deposits Currency Amount August 2022 (billions f dollars) 21,711.4 1,096.3 162.2 20,452.9 0.0 0.0 2,178.5
Suppose Alice withdraws $10,000 from her savings account to purchase shares in a money market mutual fund. Alice's action will cause _______ in the M1 money supply and _______ in the M2 money supply, everything else held constant. Select one: an increase; no change an increase; a decrease a decrease; no change a decrease; an increase
If banks are holding relatively more reserves, they are lending out relatively _ than before, thus giving rise value of the money multiplier. to a True or False: Increasing the required reserve ratio may push the economy into a recession. True False
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Suppose currency held by the public equals $450 billion, total checkable deposits equal $750 billion, excess reserves in the banking system equal $45 billion, and the required reserve ratio is 7%. Determine the sizes of the simple deposit multiplier and money multiplier. simple deposit multiplier (round to two decimal places) = money multiplier (round to two decimal places) =
8. The money multiplier declined significantly during the period 1930–1933 and alsoduring the recent financial crisis of 2008–2010. Yet the M1 money supply decreasedby 25% in the Depression period but increased by more than 20% during the recentfinancial crisis. What explains the difference in outcomes?
Question 2. Assume that the banking system of a country has total deposits of 50 billion USD. The required reserves ratio is set at 10%. It is assumed that banks hold no excess reserves and households hold no currency. Compute the money multiplier and money supply. Summarize the reasons why the actual money multiplier is significantly smaller than the theoretically possible money multiplier.
(b) Examine the effect on money multiplier and money supply when there is a sharp increase in the currency ratio.
Suppose that the required reserve ratio is 2% and you deposit $100,000 of currency into Chase Bank. What is the potential increase in deposits in the banking system brought about by your deposit? what is the potential change in money supply?