Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 29, 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
The Fed must know how much money people want to hold so that it can supply the appropriate amount?
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?
Chapter 29 Solutions
Principles of Economics (MindTap Course List)
Ch. 29.1 - Prob. 1QQCh. 29.2 - Prob. 2QQCh. 29.3 - Prob. 3QQCh. 29.4 - Prob. 4QQCh. 29 - Prob. 1CQQCh. 29 - Prob. 2CQQCh. 29 - Prob. 3CQQCh. 29 - Prob. 4CQQCh. 29 - Prob. 5CQQCh. 29 - Prob. 6CQQ
Ch. 29 - Prob. 1QRCh. 29 - Prob. 2QRCh. 29 - Prob. 3QRCh. 29 - Prob. 4QRCh. 29 - Prob. 5QRCh. 29 - Prob. 6QRCh. 29 - Prob. 7QRCh. 29 - Prob. 8QRCh. 29 - Prob. 9QRCh. 29 - Prob. 10QRCh. 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. 11PACh. 29 - Prob. 12PA
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Similar questions
- 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_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
- Assume 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_forwardAssuming that banks lend all of their access reserves and people deposit all of their money, what will the Fed have to do in order to increase the supply of money by $120 billion if the Required Reserves Ratio is .20? Select one: a. It needs to buy $20 billion dollar worth of bonds from banks b. It needs to buy $24 billion dollar worth of bonds from banks c. It needs to sell $20 billion dollar worth of bonds from banks d. It needs to sell $24 billion dollar worth of bonds from banks e. It needs to sell $40 billion dollar worth of bonds from 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
- Assume the required reserve ratio is 10% and the Open Market Committee of the FED sells $100 billion in bonds to the public. Assuming banks give out as many loans as possible, what is the total change in the money supply? If the M1 was originally $7500 billion, what is the new M1 ( After the change)You must show your work.arrow_forwardThe banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change? a) It falls by $12 billion. b) It falls by $19 billion. c) It falls by $21 billion. d) It rises by $19 billion.arrow_forwardSuppose most of your savings are in bonds and, according to an article in the Wall Street Journal, the Fed announces that it will carry out a contractionary monetary policy. What should you do? Should you continue to hold your bonds or should you move your funds into bank accounts?arrow_forward
- In the United States, the Federal Reserve sets the reserve requirement, which banks must meet through deposits at the Federal Reserve district banks and cash held at the bank. What does this requirement achieve? Check all that apply. a. It ensures that banks cannot hoard money by holding too many reserves. b. It means that a bank must have one dollar of deposits for every dollar it lends out. c. It helps to prevent bank runs by reassuring the public that banks will not make too many loans and run out of cash. d. It helps to facilitate transfers of funds between banks when a customer from one bank writes a check to a customer of another bank.arrow_forwardview picturearrow_forwardWhile cleaning your apartment, you look under the sofa cushion and find a $300 bill (and a half-eaten taco). You deposit the bill in your checking account. SAMA’s reserve requirement is 20% of deposits. A. What is the maximum amount that the money supply could increase? B. What is the minimum amount that the money supply could increase?arrow_forward
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