Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 13, Problem 3WNG
To determine
The change in money supply.
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If the reserve ratio is 5% and a bank receives a new deposit of $500, what will the bank do?
The 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.
What happens after the reduction in the reserve ratio that causes the money supply to increase?
Chapter 13 Solutions
Macroeconomics (Book Only)
Ch. 13.1 - Prob. 1STCh. 13.1 - Prob. 2STCh. 13.1 - Prob. 3STCh. 13.3 - Prob. 1STCh. 13.3 - Prob. 2STCh. 13.3 - Prob. 3STCh. 13.3 - Prob. 4STCh. 13 - Prob. 1VQPCh. 13 - Prob. 2VQPCh. 13 - Prob. 3VQP
Ch. 13 - Prob. 4VQPCh. 13 - Prob. 5VQPCh. 13 - Prob. 1QPCh. 13 - Prob. 2QPCh. 13 - Prob. 3QPCh. 13 - Prob. 4QPCh. 13 - Prob. 5QPCh. 13 - Prob. 6QPCh. 13 - Prob. 7QPCh. 13 - Prob. 8QPCh. 13 - Prob. 9QPCh. 13 - Prob. 10QPCh. 13 - Prob. 11QPCh. 13 - Prob. 12QPCh. 13 - Prob. 13QPCh. 13 - Prob. 1WNGCh. 13 - Prob. 2WNGCh. 13 - Prob. 3WNGCh. 13 - Prob. 4WNGCh. 13 - Prob. 5WNGCh. 13 - Prob. 6WNGCh. 13 - Prob. 7WNG
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- How does adjusting the reserve requirements cause the money supply to expand or contract?arrow_forwardA deposit of $100 was made to the bank as we know the money supply won't increase until the bank loans the $100. If the required reserve ratio is 6%, how much will the money supply ultimately increase once this new deposit has gone all the way through the system? What is the money multiplier in this case?arrow_forwardHow does the Federal Reserve control the money supply in the United States?arrow_forward
- The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 20% of the deposits as reserves. What is the money multiplier in this economy?arrow_forward18. You take $100 you had kept under your mattress and deposit it in your bank account. If the reserve ratio is 20%, calculate what happens to the total money supply?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_forward
- Prosperville is experiencing demand-pull inflation. The government is hoping to reduce the money supply by $400 billion. With a reserve requirement of 0.10, what is the change in reserves needed to achieve the desired change in the money supply?arrow_forwardThe Fed conducts a $10 million open-market purchase of government bonds. If the required reserve ratio is 10 percent, what are the largest and smallest possible increases in the money supply that could result? Explain.arrow_forwardIf the reserve requirement is 4 percent, what is the money multiplier?arrow_forward
- If the required reserve ratio is 8 percent, currency in circulation is $350 billion, checkabledeposits are $500 billion, and excess reserves total $100 billion, then what impact would a$100 million increase in the monetary base have on the money supply?arrow_forwardExplain how to use the reserve requirement to expand the money supply.arrow_forwardIf the Federal Reserve conducts a $10 million open-market sale and the reserve requirement is 20%, what is the maximum change in the money supply?arrow_forward
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