Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 13, Problem 6QP
To determine
The changes in the money supply.
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The U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the money supply if the Treasury shifted funds from one of those banks to the Fed?
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?
Suppose banks increase excess reserves by $574,207. If the reserve ratio is 6%, what is the maximum increase in the money supply?
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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- If bank A borrows $10 million from bank B, what happens to the reserves in bank A? In the banking system? Please explain.arrow_forwardWhy do people demand for money? Discuss the different motives of holding money.arrow_forwardSuppose that you take $150 in currency out of your pocket and deposit it in your checking account. If the required reserve ratio is 9%, what is the largest amount (in dollars) by which the money supply can increase as a result of your action?Include the $150 as part of the new money supply and assume the bank does not hold excess reserves. Give your answer to two decimalsarrow_forward
- In October 2008, the Federal Reserve began paying interest on the amount of excess reserves held by banks. How, if at all, might this affect the multiplier process and the money supply?arrow_forwardIf the Bank of Canada has an interest-rate target, what will happen to the money supply if the demand for reserves increases? Use a graph of the market for reserves to explain.arrow_forwardAssume the reserve requirement is 15%. If the Fed increases reserves by $30 billion, what is the total increase in the money supply?arrow_forward
- A 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_forwardSuppose that your bank's reserve ratio is 0.2 and you deposit $50,000 into the bank. Assume that the bank loans out the maximum amount it can, and people deposit all their money. What is the deposit multiplier? What is the total increase in deposits in the banking system? What is the change in 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
- What happens after the reduction in the reserve ratio that causes the money supply to increase?arrow_forwardSay that First Commercial Bank has reserves of $100, loans at $400 and checkable deposits of $500. The required reserve ratio is 10%. If the bank has a deposit outflow of $40, is the bank in violation of the required reserve ratio? What is the maximum amount of deposit outflow the bank can sustain without violating the ratio?arrow_forwardProsperville 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_forward
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