Part 1: 1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is.20, and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetary base, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices. Explain why each would or would not change (a few words will suffice). Give numerical answers where you have enough information. For each answer, compare the change to the initial conditions. (No graphs are required.) 1A. Calculate the initial money multiplier and money supply: Money Multiplier_ Money Supply 1.B. The Fed sells $2,000 in bonds in open market operations. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices: 1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices:
Part 1: 1. Suppose the monetary base is $80,000, the reserve requirement is 0.20, the currency-deposit ratio is.20, and excess reserves ratio is 0.20. In each case below, explain what would happen to: (i) the monetary base, (ii) the money multiplier, (iii) the money supply, (iv) interest rates, and (v) bond prices. Explain why each would or would not change (a few words will suffice). Give numerical answers where you have enough information. For each answer, compare the change to the initial conditions. (No graphs are required.) 1A. Calculate the initial money multiplier and money supply: Money Multiplier_ Money Supply 1.B. The Fed sells $2,000 in bonds in open market operations. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices: 1.C. The Treasury sells $2,000 in bonds to finance a government stimulus package. Monetary Base: Money Multiplier: Money Supply: Interest Rates: Bond Prices:
Chapter13: Monetary Policy
Section: Chapter Questions
Problem 8E
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