Some individuals have suggested raising the required reserve ratio for banks to 100 percent in a limited reserve banking system. a. What would the money multiplier be if this change was made? Assume people hold no cash. Instructions: Enter your response as a whole number. b. What effect would such a change have on the money supply? The money supply would decrease c. How could that effect be offset? By a decrease in government spending By an increase in government spending By an increase in taxes

Some individuals have suggested raising the required reserve ratio for banks to 100 percent in a limited reserve banking system. a. What would the money multiplier be if this change was made? Assume people hold no cash. Instructions: Enter your response as a whole number. b. What effect would such a change have on the money supply? The money supply would decrease c. How could that effect be offset? By a decrease in government spending By an increase in government spending By an increase in taxes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that the banking system has total reserves of Rs.250 billion. Assume also that required reserves are 10 percent of checking deposits and that banks hold no excess reserves and households hold no currency. a. Calculate the money multiplier? b. Calculate the money supply? If the State Bank of Pakistan now raises required reserves to 12.5 percent of deposits, c. Calculate the money multiplier? d. What will be the effect on Reserves? (Please write only one word "Increase", "Decrease", or "No Change" in the blank) e. The amount of money supply will decline to (Write a number in the box) Note: Write amount in Billions only and ignore typing % sign for reserve rate
Use the following example to answer the questions that follow: Imagine that you deposit $25,000 in currency (which had been storing in your closet), into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%. you As a result of this deposit, what is the maximum amount in loans that can be made by all the banks in the banking system? a. $31,250 b. $18,750 C. $100,000 d. $25,000 е. $0
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Assume that the bank makes these loans. What will the new balance sheet look like? By how much has the money supply increased or decreased? If the money multiplier is 5, how much money will ultimately be created by this event?
Suppose the Federal Reserve increases the amount of reserves by $150 million and the total money supply increases by $600 million. Instructions: Enter your answers as a whole number. a. What is the money multiplier? b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $40 million? $ million
Answer the following questions: Instructions: Enter your answers as a whole number. a. If the required reserve ratio is 25 percent, what is the monetary multiplier? 10 b. If the monetary multiplier is 50, what is the required reserve ratio? 25 percent
Suppose the Federal Reserve increases the amount of reserves by $150 million and the total money supply increases by $750 million. Instructions: Enter your answers as a whole number. a. What is the money multiplier? b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $50 million? 2$ million
In 2010 M1 was $2 trillionCurrency was $850 MillionTravelers checks were $20 BillionDemand deposits were $1030 billionThe fed decides to reduce the money supply by increasing the reserve requirement ratio from0.11 to 0.12Banks are loaned up and the amount of currency in the economy does not change.How much does the change in the reserve requirement change the money supply? Explain.
H3. The Fed wants to change the reserve requirement ratio in order to increase the money supply (Which is currently $5,000 in demand deposits. There is no currency in this economy and banks hold no excess reserves.) by $500. The money multiplier is currently 5. What is the current reserve requirement ratio and how should the Fed change it? Carefully Explain.
The reserve requirement, open market operations, and the money supply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is checkable deposits. To simplify the analysis, suppose the banking system has total reserves of $500. Determine the simple money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Simple Money Multiplier Money Supply (Percent) (Dollars) 5 10 A lower reserve requirement is associated with a ______(SMALLER/LARGER) money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to _____(BUY/SELL)$ ________ worth of U.S. government bonds. Now, suppose that, rather than…
Assume that banks lend out all their excess reserves and individuals deposit all their money. If the Required Reserve Ratio is .20, what does the Fed have to do to decrease the supply of money by $300 billion? Select one: a. Sell $60 billion worth of government bonds to commercial banks b. Sell $80 billion worth of government bonds to commercial banks c. Sell $200 billion worth of government bonds to commercial banks d. Buy $100 billion worth of government bonds from commercial banks e. Buy $60 billion worth of government bonds from commercial banks
suppose the required reserve ratio is 11%. How much additional money can BBB lend out at a maximum? suppose the required reserve ratio is lowered to 8%. What is the Maximum amount of additional money that BBB can lend out? Is this different than the maximum amount of new money BBB can create by itself? 3. suppose the required reserve ratio is raised to 15%. What is the maximum amount of additional money BBB can lend out?