Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 29, Problem 7PA
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
You decide to take $600 out of your piggy bank at home and place it in the bank. If the reserve requirement is 2 percent,
how much can your $600 increase the amount of money in the economy?
Instructions: Round your answer to the nearest dollar.
$__
So I have the first part down but I am not so sure of my answers for the true or false questions. I don't think I'm understanding them correctly
Chapter 29 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 29.1 - Prob. 1QQCh. 29.2 - Prob. 2QQCh. 29.4 - Prob. 4QQCh. 29 - Prob. 1QRCh. 29 - Prob. 2QRCh. 29 - Prob. 3QRCh. 29 - Prob. 4QRCh. 29 - Prob. 5QRCh. 29 - Prob. 6QRCh. 29 - Prob. 7QR
Ch. 29 - Prob. 8QRCh. 29 - Prob. 9QRCh. 29 - Prob. 10QRCh. 29 - Prob. 1QCMCCh. 29 - Prob. 2QCMCCh. 29 - Prob. 3QCMCCh. 29 - Prob. 4QCMCCh. 29 - Prob. 5QCMCCh. 29 - Prob. 6QCMCCh. 29 - Prob. 1PACh. 29 - Prob. 2PACh. 29 - Prob. 3PACh. 29 - Prob. 4PACh. 29 - Prob. 5PACh. 29 - Prob. 6PACh. 29 - Prob. 7PACh. 29 - Prob. 8PACh. 29 - Prob. 9PACh. 29 - Prob. 10PACh. 29 - Prob. 11PA
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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_forwardSuppose the money supply is currently $500 billion and the Fed wishes to increases it by $100 billion. Given a required reserve ration of 0.25, what should it do? If it decided to change the money supply by changing the required reserve ratio, what change should it make? Why may the Fed be reluctant to change the reserve requirement?arrow_forward
- You 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_forwardSuppose you win on a scratch-off lottery ticket and you decide to put all of your $3,500 winnings in the bank. The reserve requirement is 5%. 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? Banks choose to loan out all excess reserves. 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. All money loaned out is deposited back into the banking system.arrow_forwardNeed 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_forward
- You 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_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_forward
- help 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_forwardSuppose 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_forward
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