Q: #9
A: Tax is the money which people have to pay to the government.
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A: The ratio of labor income to total income (RL) can be calculated as follows.
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Q: #8
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- Why does expansionary monetary policy causes interest rates to drop?Explain whether each of the following eventsincreases or decreases the money supply.a. The Fed buys bonds in open-market operations.b. The Fed reduces the reserve requirement.c. The Fed increases the interest rate it pays onreserves.d. Citibank repays a loan it had previously takenfrom the Fed.e. After a rash of pickpocketing, people decide tohold less currency.f. Fearful of bank runs, bankers decide to hold moreexcess reserves.g. The FOMC increases its target for the federalfunds rate.In an economy where the central bank implements negative interest rates as a monetary policy tool, what is the most likely short-term impact on consumer savings behavior and bank profitability? A. An increase in consumer savings as people seek to safeguard their money and a rise in bank profitability due to increased lending. B. A decrease in consumer savings as the incentive to save diminishes and a decrease in bank profitability due to lower interest margins. C. No significant change in consumer savings behavior but an improvement in bank profitability due to lower borrowing costs. D. A shift in consumer investment towards riskier assets and challenges in bank profitability due to compressed interest margins. Please don't use chatgpt it is giving wrong answer and please provide valuable answer
- Fill in the blanks to make the following statements correct. a. Suppose the Bank of Canada purchases a $10,000 bond from Bob's Financial Firm, and Bob's deposits its cheque at the CIBC. This is a new deposit to the banking system and will allow the commercial banks to lend more b. If the CIBC has a target reserve ratio of 20 percent, it will keep $ 2000 as reserves and will lend $ 8000. c. Assuming there is no cash drain from the banking system, the ultimate effect is x$10,000 = $ in deposits in the banking system of a decrease an increaseSuppose that the Federal Reserve (the "Fed") buys $1.5 million of bonds from a bond dealer, who immediately deposits the funds in her checking account. What is the initial impact of this transaction? A. The banking system's holdings of securities rise by $1.5 million, and the banking system's total reserves fall by $1.5 million. B. Checkable deposits rise by $1.5 million, and the banking system's holdings of securities rise by $1.5 million. C. Checkable deposits rise by $1.5 million, and the banking system's total reserves rise by $1.5 million. D. The banking system's holdings of securities fall by $1.5 million, and the banking system's total reserves rise by $1.5 million.Isabella takes $100 of currency from her wallet anddeposits it into her checking account. If the bankadds the entire $100 to reserves, the money supply_________, but if the bank lends out some of the$100, the money supply _________.a. increases; increases even moreb. increases; increases by lessc. is unchanged; increasesd. decreases; decreases by less
- According to data, the U.S. money stock stands at about $1.1 trillion dollars. If we divide that by 245 million, the approximate number of adults in the U.S., we should each be holding about $4,490 in cash. But we are not. What explains this? a. This shows that the Fed has no idea how much cash is really in circulation. b. If they included children in the population count, it would be correct. Oc. The answer is cryptocurrency, which bumps up the amount of cash in the money supply. Od. People outside the US hold dollars, and some in the US operate all cash businesses, so they use more than the average.32. Problem 3. The acme bank and storm door company (good old ("AB&SDC") is trying to determine whatever rate of interest they should pay on the New 6 months CDs they are trying to get customers to buy. Looking at the WSJ here's some interest rates they found: Prime: 5%; LI OR: 3.25%; Fed Funds: 1.5%; 10 Month T-Note: 2.42%; 3 month T-bill 1.45%. Believe it or not, AB&SDC had a rather shaky reputation- so much knowledge investors would require an additional 8% to buy Acme's CDs to make up for their high risk of default (ignore maturity and liquidity issues). Given the above, what nominal rate of interest must Acme's CDs have to pay?If the Fed makes an open market sale of $1 million of securities to a bank, how do the bank's reserves and excess reserves change? How do bank deposits and the quantity of money change? If the Fed makes an open market sale of $1 million of securities to a bank, the bank's reserves _______. Excess reserves _______. A. increase; increase B. decrease; decrease C. increase; decrease D. decrease; increase Bank deposits _______ and the quantity of money _______. A. increase; decreases B. increase; increases C. decrease; increases D. decrease; decreases
- Imagine that Mr Smith takes out a loan for £10,000 to start a new business. The bank credits the £10,000 to Mr Smith's current account. Choose AT LEAST ONE correct answer. a. Since Mr Smith has been credited with the £10,000 in his current account, yet he now owes the bank £10,000, the total amount of money in the economy has remained the same. b. The extra £10,000 in Mr Smith's current account is an asset for the bank, because this is money that he owes to them. The loan is an asset for the bank. O d. At the point that the loan is made, the bank's net worth decreases and Mr Smith's net worth increases by the same amount, £10,000.Hi, can someone help me with this question? Thank you in advance. 1. Suppose the Central Bank has just announced a higher overnight interest rate, thereby decreasing the desire for new loans. A commercial bank is holding excess reserves and wants to buy $46,000 of government bonds from the CB (which they are willing to sell). a. What is the immediate change in the Central Bank’s assets and liabilities? b. What is the immediate change in the commercial bank’s assets?Explain which interest rate sets the upper limit on the federal funds rate. The upper limit on the federal funds rate is the _______ because _______. A. discount rate; the discount rate must be 1 percent higher than the federal funds rate B. interest on reserves rate; a bank will borrow reserves only if the federal funds rate is less than the interest on reserves rate C. discount rate; a bank will borrow reserves only if the federal funds rate is less than the discount rate D. long-term real interest rate; the loanable funds market determines the federal funds rate range
