Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 13, Problem 8CQ
(a)
To determine
Identify the impact of the reduction in the discount on the money supply.
(b)
To determine
Identify the impact of the increase in the reserve requirements on the money supply.
(c)
To determine
Identify the impact of the purchase of securities on the money supply.
(d)
To determine
Identify the impact of the sale of the treasury bill on the money supply.
(e)
To determine
Identify the impact of an increase in the discount rate on the money supply.
(f)
To determine
Identify the impact of a sale of securities on the money supply.
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Students have asked these similar questions
What steps can the Federal Reserve take to increase the money supply?
a) The Federal Reserve can reduce personal income tax rates to encourage households to spend more money
b) The Federal Reserve can require all banks to close by 4:00 pm on weekdays and remain closed on weekends.
c) The Federal Reserve can increase reserves requirements for banks
d) The Federal Reserve and raise the discount
e) The Federal Reserve can buy US Treasury securities
e) The Federal Reserve
Controlling the money supply allows the Federal Reserve to
a. Influence government spending and taxes and therefore consumption and investment
b. Influence interest rates and therefore consumption and investment
c. Influence interest rates and therefore government spending and taxes
d. Influence government spending and taxes and therefore interest rates
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.
Chapter 13 Solutions
Economics: Private and Public Choice
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- The central bank of the fictitious country "Alpha" raises bank reserves by $200. What effect will the increase in bank reserves have on the money supply in each of the following situations: a. If the banking system is a 100% reserve banking system, the money supply will increase by $ b. The banking system is a fractional reserve banking system with a desired reserve deposit ratio of 0.25, the money supply will increase by $1arrow_forwardGive typing answer with explanation and conclusionarrow_forwardWhy are bank accounts included in our definition of the money supply?arrow_forward
- i need the answer quicklyarrow_forwardIf the Required Reserve Ratio is 0.10, what does the Fed need to do to contract the supply of money by $40 billion? Select one: a. Buy $2 billion worth of government bonds from banks b. Buy $4 billion worth of government bonds from banks c. Buy $8 billion worth of government bonds from banks d. Sell $4 billion worth of government bonds to banks e. Sell $2 billion worth of government bonds to banks f. Sell $8 billion worth of government bonds to banksarrow_forwardThe Bank of Canada sets the reserve requirement, which banks must meet through deposits at the Bank of Canada and cash held at the bank. What do these requirements achieve? Check all that apply. They help to facilitate transfers of funds between banks when a customer from one bank writes a cheque to a customer of another. They help to control the money supply. They help to prevent bank runs by reassuring the public that banks will not make too many loans and run out of cash. They mean that a bank must have one dollar of deposits for every dollar it lends.arrow_forward
- BUSN5 CH2 WKSMultiple ChoiceIdentify the choice that best completes the statement or answers the question.1. Define economics.a) a financial and social systemb) the study of a country’s overall economic issuesc) the integration between consumers, families, and businessesd) the study of the choices that different entities make in allocating resources2. Macroeconomics focuses ona) the major issues facing the national economy, but has little or no relevance to individuals.b) smaller economic units such as individual consumers, families, and individual businesses operating within the economy.c) the major issues facing the national economy that may seem abstract, but directly affect an individual’s day-to-day life. d) the role of government, while microeconomics focuses on the private sector.3. After the collapse of the dot com bubble and the 9/11 terrorist attacks, the stock market depreciated and unemployment increased leading many to fear that the…arrow_forwardWhich of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves? Select one: a. The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease b. The money supply is increased, which decreases the interest rate, and causes investment spending, output, and employment to increase c. A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment d. A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employmentarrow_forwardThe sale of Treasury securities by the Federal Reserve will, in general, not change the money supply. not change the quantity of reserves held by banks. increase the quantity of reserves held by banks. decrease the quantity of reserves held by banks.arrow_forward
- Federal funds are A) created as banks to lend out money. B) any funds printed by the federal government. C)private bank deposits at the Federal Reserve (Fed). C) Fed deposits at private banks. D) government agency deposits at the Fed.arrow_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_forwardWhich of the following is the role of the Federal Reserve System? Select one: a. Set the Required Reserve Ratio for Bank of America b. Manage the account for South Carolina and other state governments c. Make loans to local businesses d. Print new money e. All of these are roles of the Fedarrow_forward
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