Suppose that the reserve requirement for chequing deposits is 15 % and the banks do not hold any excess reserves. What is the effect on the economy’s reserves and the money multiplier if the central bank sells $2 million of government bonds
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Suppose that the reserve requirement for chequing deposits is 15 % and the banks do
not hold any
money multiplier if the central bank sells $2 million of government bonds
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- Suppose that the reserve requirement for chequing deposits is 15 % and the banks donot hold any excess reserves. What is the effect on the economy’s reserves and themoney multiplier if the central bank sells $2 million of government bonds?6. a) If US money supply in the beginning of the year is $1148 billion. Suppose the FedBank has decided to raise the reserve ration from 10 percent to 11 percent. How itwould affect the money supply? b) If tax multiplier is -2, what is the government spending multiplier? c) In order to increase equilibrium income, either the government can increasegovernment spending or may go for tax cut? What would you suggest and why?Banks in New Transylvania have a desired reserve ratio of 10 percent of deposits and no excess reserves. The currency drain ratio is 50 percent of deposits. Now suppose that the central bank increases the monetary base by $900 billion. How much of the initial amount loaned does not return to the banks but is held as currency? Why does a second round of lending occur? Calculate money multiplier in this example? What is the final increase in the quantity of money? Give typing answer with explanation and conclusion
- QUESTION 12 The dollar depreciates by 20 percent against the Euro. Powell should O Increase the monetary base by 20 percent Reduce the monetary base by 18 percent Reduce the moriey 22 percent. Do nothing Not enough information to answer this question QUESTION 13 Banks become more optimistic due to an improvement in the economy. The money multiplier increases by 10 percent. Powell should O Increase the monetary base by 20 percent O Reduce the monetary base by 8 percent O Reduce the money 22 percent O Do nothing O None ofthe above QUESTION 14 President Biden increases the government deficit to 10 percent of GDP. Powell should O Increase the money supply by 10 percent O. Reduce the money supply by 10 percent O Reduce the money supply by 12 percent O Do nothing O We do not have enough information to answer.A rise in rr raises the money multiplier. O True O False11. Which of the following is an assumption behind the formula for the-simple moncy multiplier, Mm - 1 ㅠ ? A. Banks hold no excess reserves. B. Banks lend out all deposits and hold no reserves. C. Banks transfet all deposits to the central bank: D. All deposits involve a physical exchange of currency F Banks only lend to their own depositors
- 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.Suppose the Federal Reserve sets the reserve requirement at 10 percent, banks hold no excess reserves, and no additional currency is held. Instructions: Enter your answers as whole numbers. Include any negative signs if necessary. a. What is the money multiplier? b. By how much will the total money supply change if the Federal Reserve changes the amount of reserves by -50 million? million c. Suppose the Federal Reserve wants to decrease the total money supply by $600 million. By how much should the Federal Reserve change reserves to achieve this goal? millionHow is the amount of reserves banks hold related to the amount of money the banking system creates? 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? Use Microsoft equation tool where needed to show all equations or notations. How much additional new demand deposits could the $3,000 deposit support?
- Cash held by public Transactions deposits Required reserves Excess reserves U.S. bonds held by public Item Amount The public will hold $375 billion in bonds. O The money supply will increase by $25 billion. The money supply will increase by $125 billion $80 billion $150 billion $30 billion $0 billion $350 billion If the Federal Reserve buys $25 billion in bonds from the public, then which of the following is true after the multiplier process? Excess reserves would go up by $20 billion.9. If the demand for reserves did not fluctuate, the Fed could pursue both a reservestarget and an interest-rate target at the same time.” Is this statement true, false, oruncertain? Explain.In the Economy the multiplier is given to be as 14 Calculate the value of legal reserve ratio