Class Work Monetary Policy all Markets1. The following is the "T-Account" for the entire banking system. Assume that banks are fully loaned up: this meansthat banks are holding only the required amount of reserves and thus are making the maximum possible amount ofloans.Reserves -Loans-a. The money multiplier isb. Reserves for the entire banking system area) The change in deposits.b) The change in Loans.c) The change in Reserves.r-10%D-700bc. Loans for the entire banking system ared. If the amount of currency held outside banks by the public is 500b the money supply ise.If the Fed buys 15b in bonds, calculate:f. Suppose the Fed wants to increase the Money Supply by 500b. Calculate the necessary amount of purchase orsale of bonds.

Fractional reserve banking functions by mandating that banks maintain only a portion of their…

Class Work Monetary Policy all Markets 1. The following is the "T-Account" for the entire banking system. Assume that banks are fully loaned up: this means that banks are holding only the required amount of reserves and thus are making the maximum possible amount of loans. Reserves - Loans - a. The money multiplier is b. Reserves for the entire banking system are c. Loans for the entire banking system are d. If the amou r-10% D-700b

Class Work Monetary Policy all Markets 1. The following is the "T-Account" for the entire banking system. Assume that banks are fully loaned up: this means that banks are holding only the required amount of reserves and thus are making the maximum possible amount of loans. Reserves - Loans - a. The money multiplier is b. Reserves for the entire banking system are c. Loans for the entire banking system are d. If the amou r-10% D-700b

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 10PA

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List the three traditional tools that a central bank has for controlling the money supply.
Table 10-2 Last Bank of Cedar Bend Assets: Reserves Loans Liabilities: $25 000 Deposits $180 000 S155 000 efer to the Table 10-2. If the reserve requirement is 10 percent and then someone deposits $50 000 into the bank, what is the bank's reserve osition? alect one: cross a. It will have $52 000 in excess reserves. cros b. It will need to raise reserves by $5000. cros c. It will have $57 000 in excess reserves. d. It will have excess reserves of $2000.
. Assume that the banking system has total reservesof $100 billion. Assume also that required reservesare 10 percent of checking deposits and that bankshold no excess reserves and households hold nocurrency.a. What is the money multiplier? What is the moneysupply?b. If the Fed now raises required reserves to20 percent of deposits, what are the change inreserves and the change in the money supply
a. Distinguish between legally required reserves and excess reserves. b. Why don’t banks hold a 100 percent reserves? How is the amount of reserves bank hold related to the amount of money the banking system creates? c. Define the term money multiplier? d. Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? How much additional new demand deposits couldthe $3,000 deposit support?
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.
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