Table # 1Type of MoneySmall time depositsLarge time depositsDemand depositsOther checkable depositsSavings depositsTravelers' checksMoney market mutual fundsU.S. CurrencySpecial Drawing Rights (SDR)Miscellaneous categories of M2Amount (in $billion)$75$80$75$14$10$11$15$201$10$253RM 28. Refer to Table1. What is the M1 money supply?A) $200 billion.B) $216 billion.C) $226 billion.D) $301 billion29. Refer to Table 1. What is the M2 money supply?A) $426 billion.B) $325 billion.C) $351 billion.D) $471 billion

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28. Refer to Table1. What is the M1 money supply? A) $200 billion. B) $216 billion. C) $226 billion. D) $301 billion

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

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Table # 1
Type of Money
Small time deposits
Large time deposits
Demand deposits
Other checkable deposits
Savings deposits
Travelers' checks
Money market mutual funds
U.S. Currency
Special Drawing Rights (SDR)
Miscellaneous categories of M2
Amount (in $billion)
$75
$80
$75
$14
$10
$11
$15
$201
$10
$25
3
RM

28. Refer to Table1. What is the M1 money supply?
A) $200 billion.
B) $216 billion.
C) $226 billion.
D) $301 billion
29. Refer to Table 1. What is the M2 money supply?
A) $426 billion.
B) $325 billion.
C) $351 billion.
D) $471 billion

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3. What would be the effect of increasing the banks' reserve requirements on the money supply?
n the table below, the money supply, defined by M3, is equal to ........ Currency held by the non-bank public ($ billion) Current deposits at banks ($, billion) Other deposits at banks and other deposits held by other deposit -taking institutions ($, billion) 60 240 1500 Select one: a. 1200 billion b. 1800 billion c. 1500 billion d. 1740 billion
N7 2. Show 3 rounds of deposits, starting with a $2000 deposit into a checking account at bank A. Assume the required reserve rate is 5% . a. Show the effect at bank A b. Show the effect at bank B C. Show the effect at bank C d. What will be the total increase to the money supply?
5. Consider the T-table of the Bank of Boston. Suppose the Federal Reserve Bank buys an additional $2 million in government bonds from the Bank of Boston. Assume (1) the required reserve ratio is 10 percent, and (2) the Bank of Boston issues all excess reserves in loans (I.e., there are no excess reserves). The new money supply equals $ million. Submit Balance sheet of the Bank of Boston Liabilities -55,000,000 Checkable deposits +$5,000,000 Assets Government bonds Currency (= bank reserves) +$5,000,000 Loans $0
4. What components of money are counted as part of M1? A) currency, M2 and checking accounts. B) currency, travelers' checks, checking accounts and M2 O c. C) C) currency, travelers' checks and checking accounts. D) currency, travelers' checks and money market accounts 10. Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? A) An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier B) An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier C) Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. D) Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.
4) Listen If the money multiplier decreased from 20 to 4, then the Fed increased the reserve ratio from 5 percent to 8 percent. the Fed increased the fed funds rate from 5 percent to 8 percent. the Fed increased the reserve ratio from 5 percent to 25 percent. the Fed decreased the fed funds rate from 8 percent to 5 percent. Question 30 (1 point) )Listen The FOMC is able to increase the money supply when it buys US government securities. The increase will be larger, the larger is the reserve ratio. buys US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the smaller is the reserve ratio. sells US government securities. The increase will be larger, the larger is the reserve ratio.
What happens to M1 when Serena withdraws $1000 from a checking account and places it in her purse? a.It increases by $1000 b.It increases by more than $1000 because of the money multiplier effect c.Nothing. It does not change. d.It decreases by more than $1000 because of the money multiplier effect e.It decreases by $1000
Suppose the Fed decided to purchase $100 billion worth of government securities in the open market. Assume all payments are directly deposited into or withdrawn from the banking system. What impact would this action have on the economy? Specifically, answer the following questions. Instructions: Enter your responses as a whole number. a. How will M1 be affected initially? O Decrease by $100 billion O Increase by $100 billion O Not enough information to answer O No initial change to M1 b. By how much will the banking system's lending capacity increase if the reserve requirement is 20 percent? $ billion c. Must interest rates rise or fall to induce investors to utilize this expanded lending capacity? O Rise O Fall d. By how much will aggregate demand initially increase if investors borrow and spend all the newly available credit? $ billion e. Under what circumstances would the Fed be pursuing such an open market policy? O Inflation O Recession f. To attain those same objectives, what…
Real-Time Data Analysis Exercise* *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The table shows the quantities of M1, M2, and their components in August 2022 but with two values missing and shown in the table as 0.0. What are the missing values? >>> Answer to the nearest 1 decimal place. Other liquid deposits are $ Demand deposits are $ billion. billion. C Measures and Components of Money in August 2022 M2 Money market funds Small time deposits M1 Demand deposits Other liquid deposits Currency Amount August 2022 (billions f dollars) 21,711.4 1,096.3 162.2 20,452.9 0.0 0.0 2,178.5
2. Suppose the public holds 30% of their money as currency and the rest as deposits in their banks. Moreover, the central bank requires banks to maintain a reserve-deposit ratio of 15%. What will be the change in the total money supply if the central bank buys $10 million of government bonds from the public and pays for them by creating money (round to the nearest decimal point)? a. The money supply will decrease by $51.3 million b. The money supply will increase by $51.3 million c. The money supply will increase by $24.7 million d. The money supply will increase by $66.7 million e. All of the answers here are incorrect.