
Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Transcribed Image Text:4. How the Fed measures the money supply
Which of the following is not considered a reliable measure for monitoring and controlling the money supply, due to its volatility? Check all that apply.
M1
M2
M3
M1
M2
M3
☐ ☐
000
☐
☐
Identify whether each of the following examples belongs in M1, M2, or M3. If an example belongs in multiple categories, be sure to check multiple
boxes.
Example
Raphael has a $10 bill in his wallet.
A bank sells securities to another bank and agrees to buy the securities back at a higher price, one month from today.
Alex has $30,000 in a money market account.
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- If the central bank sells 500 in bonds to a bank that has issued 10,000 in loans and is exactly meeting the reserve requirement of 10, what will happen to the amount of loans and to the money supply in general?arrow_forwardExplain what would happen if banks were notified they had to increase their required reserves by one percentage point from, say, 9 to 10 of deposits. What would their options be to come up with the cash?arrow_forwardExplain how to use an open market operation to expand the money supply.arrow_forward
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