With a reserve requirement of 10% and an initial increase of $500 to the monetary base,what is the total amount of money that could be added to the money supply? (Hint: use themoney multiplier formula)$10,000O $11,000$550$5,000$1,100.

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Answered: With a reserve requirement of 10% and…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter28: Monetary Policy And Bank Regulation

Section: Chapter Questions

Problem 18RQ: Explain how to use an open market operation to expand the money supply.

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Explain what would happen if banks were notified they had to increase their required reserves by one percentage point from, say, 9 to 10 of deposits. What would their options be to come up with the cash?
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19)Consider the following scenario. The currency deposit ratio is 0.5, the required reserve ratio is 0.25. The bank holds the required reserves, plus a little extra in case of a large withdrawal equal to e(R)=0.5-2R. Where R is the interest rate and it is equal to 12.5. The money supply is £600. Using the money multiplier approach calculate how many pounds worth of bonds would the Bank of England have to buy/sell in order to increase the money supply to £900? a. Sell bonds for an amount equal to $200. b. Buy bonds for an amount equal to $200. c. Buy bonds for an amount equal to $400. d. Sell bonds for an amount equal to $250.
0 Question 22 (use the Deposit Expansion Multiplier (DEM) formula) Using the Fractional Reserve banking system, if the reserve ratio is 6% and someone deposits $1,000 into his checking account, the banking system potentially can increase the money supply to O $16,750.25 O $16,666.66 $16,100 $16.230.66
Money market mutal fund balances held by businesses $100 money market mutual funds balances held by individuals $220 currency in Bank $10 currency in circulation $70 savings deposits, including money market deposit amounts $50 large-denominated (100,000 or more) time deposits 180 small denominates (100,000 or less) time deposits 80 checkable deposits 90 Refer to the table. Money supply M1 for this economy is A.) 160 b) 70 c. 90 D. 170
6. The money multiplier is equal to the reciprocal of the reserve requirement ratio. However, scholars have pointed out that such formula only provide the upper limit (maximum value) of the money multiplier seeing that the money multiplier is typically less than what the formula estimates. Why is this the case? Explain in detail.
ou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 1212%, how much will your deposit increase the total value of checkable bank deposits? $ If the reserve requirement is 44%, how much will your deposit increase the total value of checkable deposits? $ Increasing the reserve requirement the money supply.
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please type the answer by computer, so i can see it clearly, thank you!!! This month, the Hong Kong government planned to issue up to $2.55 billion in retail green bonds. Explain how this action might effect Hong Kong's money supply.
4. a) Suppose that Tk.10,000 in new taka bills (never seen before) falls magically from the sky into your hands. What are the minimum increase and the maximum increase in the money supply that may result? Assume the required reserve ratio is 10 percent.b) Suppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not?c) Suppose that instead you getting Tk. 10,000 from the sky or a check through your grandmother, you get the money from your mother who had buried it in a can in her backyard. In this case, would the maximum increase in the money supply be what you found it to be in part a)? Why or why not?
8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $300. Determine the 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 higher reserve requirement is associated with a 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 worth of U.S. government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin…

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With a reserve requirement of 10% and an initial increase of $500 to the monetary base, what is the total amount of money that could be added to the money supply? (Hint: use the money multiplier formula) $10,000 O $11,000 $550 $5,000 $1,100 .