EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Question
Chapter 21, Problem 8PA
To determine
The increase in money supply from deposits and open market purchase.
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Jane deposits $175 into her bank, and the reserve requirement is 15 percent. How much is the excess reserve in dollars
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how much can your $600 increase the amount of money in the economy?
Instructions: Round your answer to the nearest dollar.
$__
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Chapter 21 Solutions
EBK ESSENTIALS OF ECONOMICS
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1CQQCh. 21 - Prob. 2CQQCh. 21 - Prob. 3CQQCh. 21 - Prob. 4CQQCh. 21 - Prob. 5CQQCh. 21 - Prob. 6CQQ
Ch. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QRCh. 21 - Prob. 7QRCh. 21 - Prob. 8QRCh. 21 - Prob. 9QRCh. 21 - Prob. 10QRCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PA
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- Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve requirement is 10%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: $ Which events could cause the increase in the money supply to be less than its potential? All money loaned out is deposited back into the banking system. Banks choose to loan out all excess reserves. SEL Some loan recipients choose to hold some cash instead of depositing all of it in banks. Banks decide to keep some excess reserves on hand. C Z MODE PAYLA I topm PEDRULESTAN SVETE D P Activate Windows Salto Settings to activate Windowsarrow_forwardThe Fed must know how much money people want to hold so that it can supply the appropriate amount?arrow_forwardYou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 20%, how much will your deposit increase the total value of checkable bank deposits? If the reserve requirement is 8%, how much will your deposit increase the total value of checkable deposits? Increasing the reserve requirement decreases the money supply. %24 %24arrow_forward
- Need help with these questions, I need them all answered. Thank you! 1. Your cousin says: "I know what money is (pulling out a dollar bill and 23 cents) it's this!" What is your cousin missing when it comes to understanding and defining the money supply? (What counts as the "money supply" - say M1 - as the U.S. defines it?) 2. What is the top decision-making body within the Federal Reserve System, and how does one get to be a voter within that decision-making body? 3. If you use a credit card to buy something are you using "money" strictly speaking? Why or why not?arrow_forwardYou find a $1,000 bill hidden beneath the floorboards in your house and decide to deposit it in your checking account. On the same day, the Fed decides to buy $1,000 in government securities from your bank. Assuming a 10 percent reserve requirement, which of these actions creates more money in the economy?arrow_forwardThe economy of Elmendyn contains 900 $1 bills. If people hold all money as currency, the quantity of money is . If people hold all money as demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain 100 percent reserves, the quantity of money is . If people hold all money as demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is . If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 12.5 percent, the quantity of money is .arrow_forward
- If 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_forwardhelp pleasearrow_forwardWhen the Fed wishes to decrease the money supply, it can a. increase the required reserve ratio. b. decrease the required reserve ratio. c. ask people to buy more bonds. d. turn additional funds over to the Treasury.arrow_forward
- Suppose Adrienne receives a payment in cash of $400 and she deposits it in a bank. i. If the banking system is 100 percent reserve, how does the money supply change? i. If the reserve requirement is 10 percent and the bank holds no excess reserve, how does the money supply change? in. If the reserve requirement is 10 percent and the bank holds an excess reserve of 2 percent, how does the money supply change? iv. Now suppose the reserve ratio is 25 percent. How much money can be created from $100 of reserves? Show your work.arrow_forwardAssume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required 10.00 %, and the Federal Reserve wants to increase the money supply by $80.00 million, the Fed would need to make a purchase of $ million. (Insert your answer in millions, and round to two decimal places.)arrow_forwardAssume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00%, and the Federal Reserve wants to increase the money supply by $60.00 million, the Fed would need to make an open market purchase of $ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 5.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a smaller open market purchase but a larger open market sale. B. a larger open market purchase but a smaller…arrow_forward
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