Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 13, Problem 15CQ
(a)
To determine
Identify the effect of an event in M1 and M2 money supply.
(b)
To determine
Identify the effect of an event in M1 and M2 money supply.
(c)
To determine
Identify the effect of an event in M1 and M2 money supply.
(d)
To determine
Identify the effect of an event in M1 and M2 money supply.
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Determine whether each of the following is included in both M1 and M2 or M2 only:
a. a Connecticut quarter
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e. American Express travelers’ checks
John deposits $1,600 into his checking account. If the reserve ratio is 5%, what are the
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Required reserves: $
Excess reserves: $
ECB Bank is a commercial bank in Country A. The T-account of ECB Bank is shown below:
Assume the Central Bank of Country A requires a reserve ratio of 8% and banks in Country A do not hold excess reserves currently.
Chapter 13 Solutions
Economics: Private and Public Choice (MindTap Course List)
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Similar questions
- M1 and M2 are two measures of money supply. M1 includes only the most liquid forms of money like currency, checking account deposits, and traveler’s checks. M2 includes all of M1 along with some less liquid forms of money like savings accounts and money market deposits. Suppose you transfer $2,000 from your mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2 as per the economy?arrow_forwardIf the required reserve ratio (RRR) in U.S. is 10 percent and you deposit $5,000, which is wired from your parents’ bank account in Germany to your checking account in the U.S. National Bank, then the change in the U.S. money supply eventually should be Group of answer choices a $45,000 increase. a $5,000 increase. no change. a $50,000 increase.arrow_forwardThe table below shows the components of M1 and M2 in the U.S. Use the table to calculate Total M2. Round to the third decimal place. Components of M1 and M2 in the U.S. $ trillions Currency $3 Individual market mutual fund balances $0.764 Demand deposits and other checking accounts $3.1 Savings accounts $8.475 Traveler's checks $0.004 Time deposits $0.492arrow_forward
- A depositor decides to transfer $3000 from a checking account to a savings account. Create a balance sheet for the bank and show how the balance sheet will be affected due to this change. Only list the changes on your balance sheet. Then explain what will happen to the M1 and M2 money supplies.arrow_forwardIf the desired reserve ratio of a banking system is 10%, and there is a currency drain of 10%, what is the size of its money multiplier? a) zero b) 5.5 c) 6.7 d) 20 e) 10arrow_forwardThe First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves? Show your calculations.arrow_forward
- Could each of the following items potentially serve as money? Consider each as a medium of exchange, a unit of account, or a store of value. Visa credit card. Federal Reserve note. Debit card. Picasso painting.arrow_forwardCurrency held in the vault of a Bank like Wells Fargo is: a) counted as part of both M1 and M2 b) not counted as part of the money supply c) counted as part of M1 but not M2 d) counted as part of M2 but not M1arrow_forward1.4 Suppose you transfer $4,000 from your money market mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2? 1.5 Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason? 1.6 Suppose that the required reserve ratio is 2 percent, 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 the money supply?arrow_forward
- Use the following table to determine the levels of M1 and M2 in the United States. Money Categories in the United States Asset Amount (billions of dollars) Currency $86 Demand deposits 83 Money market funds 45 Other checkable deposits 39 Savings deposits 472 Small time deposits 24 Traveler's checks 5 Instructions: Enter your answers as a whole number. a. Calculate the M1 money supply. $ billion b. Calculate the M2 money supply. $ billionarrow_forwardCompare the use of open market operations, discounting, and changes in reserve requirements to control the money supplyarrow_forwardIf the required reserve ratio is 10 percent, currency in circulation is $600 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, then the money supply is billion. $1,480.80 $1,400 $680.8 $1,300arrow_forward
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