Refer to Table 29-2. What is the M1 money supply in Florencial? a. $705 billion b. $505 billion c. $585 billion d. $570 billion

Balance sheet of Bank National Assets Liabilities Vault Cash $1,500 Deposit in Fed $ 500 Loans $4,000 Total Assets $6,000 Deposits $6,000 Total Liabilities $6,000 (1) If r = 10%, how much can the whole banking system expand the money supply? a. $20,000 b. $54,000 c. $40,000 d. $11,000 e. $5,000 (2) If the Fed changed the reserve requirement from 10% to 5% - the bank’s Excess Reserves (ER) would: a. Increase by $300 b. Increase by $1700 c. Decrease by $1400 d. Decrease by $2000 e. Increase by $5700 (3) If the Fed changed the reserve requirement from 10% to 25% the money supply (MS) in the whole banking system could: a. Decrease by $18000 b. Decrease by $54000 c. Increase by $18000 d. Decrease by $36000 e. Increase by $36000 (4) If the Fed changed the reserve requirement from 10% to 39% Bank National would now have ER of: a. -$340 b. -$3,660 c. -$2,340 d. -$500 e. -$250

B. Consider the following data Currency Checkable deposits Savings deposits $1,200 billion $1,500 billion $2,500 billion Banking system's reserve-to-deposit ratio is 30%. Calculate (show your werk) 1. Bank reserves = 2. Monetary base = 3. M1 money supply = %3D 4. Realistic money multiplier =

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8. The reserve requirement, open market operations, and the money supply Consider a system of banking in which the Federal Reserve uses required reserves to control the money supply (as was the case in the United States before 2008). Assume that banks do not hold excess reserves and that households do not hold currency, so the only money exists in the form of demand deposits. To further simplify, assume the banking system has total reserves of $400. Determine the money multiplier as well as the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 20           10             A higher reserve requirement is associated with a    money supply.   Suppose the Federal Reserve wants to increase the money supply by $200. Maintain the assumption that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%,…

8. A bank's "required reserves" are: none of the answers given is correct held as deposits with the Federal Reserve System equal to its transactions deposits equal to its checkable deposits

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

2. Discuss why fiat money can coexist with other assets that have higher rate of returns.

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.

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