Refer to table below. Suppose that the Fed had decided to set the U.S. money supply in December 1932 and in December 1933 at the same value as in December 1930. a. Assuming that the values of currency held by the public and the reserve-deposit ratio had remained as given in the table, what should the values of bank reserves be to reach the stated target for the U.S. money supply? Instruction: enter all responses rounded to two decimal places Money SupplyCurrency held by publicReserve-deposit ratioActual Bank reservesNeeded Bank reservesDecember 1930$44.1 billion$3.85 billion0.075$3.31 billion$3.31 billionDecember 1932$44.1 billion$4.82 billion0.109$3.18 billion billionDecember 1933$44.1 billion$4.85 billion0.133$3.45 billion billion b. In order to accomplish this objective, the Fed would have had to conduct open market purchases to increase bank reserves by $ _______ billion in 1932 and $_________ billion in 1934.

a) The value of bank reserves should be: In 1932: Money supply-currency held with the public = depositsSo, deposits = 44.1-4.82=39.28The required reserve R = 39.28×0.109= $4.28 billion In 1933: Deposits = 44.1- 4.85=39.25The required reserve = 39.25×0.133=$5.22 billion b) So as to reach to this objective and complete it, the Fed will have to conduct open market purchases so that the bank reserves can be increased by $ 1.1 billion in 1932 & by $1.77 billion in 1933.Answer: a) 1932: $4.28 billion 1933: $5.22 billion b) 1932: $1.1billion 1933: $1.77 billion.

Answered: Refer to table below. Suppose that the…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Refer to table below. Suppose that the Fed had decided to set the U.S. money supply in December 1932 and in December 1933 at the same value as in December 1930.

a. Assuming that the values of currency held by the public and the reserve-deposit ratio had remained as given in the table, what should the values of bank reserves be to reach the stated target for the U.S. money supply?

Instruction: enter all responses rounded to two decimal places

	Money Supply	Currency held by public	Reserve-deposit ratio	Actual Bank reserves	Needed Bank reserves
December 1930	$44.1 billion	$3.85 billion	0.075	$3.31 billion	$3.31 billion
December 1932	$44.1 billion	$4.82 billion	0.109	$3.18 billion	billion
December 1933	$44.1 billion	$4.85 billion	0.133	$3.45 billion	billion

b. In order to accomplish this objective, the Fed would have had to conduct open market purchases to increase bank reserves by $ _______ billion in 1932 and $_________ billion in 1934.

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