Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 13, Problem 7QP
To determine
The change in money supply.
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Students have asked these similar questions
What happens after the reduction in the reserve ratio that causes the money supply to increase?
The task I am struggling with:
Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank. The reserve ratio is 10%.
a) how dies the deposit initially change the T-account of the local bank? How does it change the money supply?
b) If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit?
c) if every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy´s initial cash deposit of $500?
Thank you very much for your help.
How does adjusting the reserve requirements cause the money supply to expand or contract?
Chapter 13 Solutions
Macroeconomics
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. 1QPCh. 13 - Prob. 2QPCh. 13 - Prob. 3QP
Ch. 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. 1WNGCh. 13 - Prob. 2WNGCh. 13 - Prob. 3WNGCh. 13 - Prob. 4WNGCh. 13 - Prob. 5WNGCh. 13 - Prob. 6WNGCh. 13 - Prob. 7WNGCh. 13 - Prob. 8WNGCh. 13 - Prob. 9WNGCh. 13 - Prob. 10WNG
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Similar questions
- 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_forwardExplain the answer and/or show any calculation to prove the answer. The central bank in Malaysia has bought $100 in bonds from a bank. The reserve requirement is 25%. What is the maximum possible change in the money supply?arrow_forwardThe 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_forward
- Which of the following lists two things that both decrease the money supply? a. Raise the discount rate and lower the reserve requirement ratio b. Raise the discount rate and raise the reserve requirement ratio c. Lower the discount rate and raise the reserve requirement ratioarrow_forwardYour friend Sarah borrows money from her bank to buy a car. Explain to her the transactions in which the bank sets up the loan, and why the loan involves an increase in the money supply.arrow_forwardWhy are bank accounts included in our definition of the money supply?arrow_forward
- Banks have a reserve ratio of 20%, and households deposit all cash into the banking system. How many dollars should the Fed print in order to increase the money supply by $7,000,000?arrow_forwardWhat amount of additional money supply can a bank system create if the required reserves rate is 10%, and deposits are $5 million?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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