Suppose that the Central Bank has currently set the reserve requirements in the economy to be equal to 10%. Assume that there is no cash drain. Suppose also that in this economy there are $400 in initial deposits and $6,000 of cash. 6. Given the above, what is the total Money Supply (MS) in the economy?

Economy’s entire money supply is $400,000 and required reserve ratio is 15%. As a result of the Fed's sale of $8,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Charles, a First Main Street Bank’s customer re-pays back the $8,000 loan he took out a few months ago. Which of the following most accurately describes First Main Street Bank’s actions? a) the bank creates a $8,000 loan b) the bank keeps the $8,000 as reserves c) the bank creates a $52,000 loan d) the bank keeps the $1,200 as reserves The money supply in the economy is $______.

8. Consider a hypothetical economy with a nominal GDP of $1.2 trillion, real GDP of $600 billion, and money supply of $60 billion. Suppose commercial banks are required to maintain a reserve requirement of 10% of deposits. Assume that banks do not hold excess reserves. a) Calculate the money multiplier for this economy. If the central bank buys $1 billion of government bonds, what is the effect on money supply? Show your work. b) Using the quantity theory of money, calculate the price level and the velocity of money for this economy prior to central bank action. Show your work. c) Assume that velocity is constant and real GDP increases by 2% each year. What will happen to nominal GDP and the price level next year if money supply does not change? Show your work. d) In (c), what money supply should the central bank set next year to keep the price level unchanged? Show your work. e) In (c), what money supply should the central bank set next year if it wants inflation of 5%? Show your…

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?

1.6 Suppose that the required reserve ratio is 2 percent, and you deposit $100,000 of currency into Chase Bank. What is the potential increase in deposits in the banking system brought about by your deposit? What is the potential change in the money supply? rese hy is the real-world depos where RR is the required

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Suppose the reserve requirement is 8% and a new deposit of $900 billion is made into the banking system. Create T accounts to analyze the following questions. a) Initially, reserves would increase by? b) Required reserves would increase by? c) Excess reserves would increase by? d) The first round of loans would amount to? e) The second round of loans would amount to approximately? f) The third round of loans would amount to approximately? g) For the entire macroeconomy, after the infinite rounds of loans were taken into account, money supply would increase by? h) If the Federal Reserve bought bonds worth $600 billion, money supply would increase by? i) If the Federal Reserve sold bonds worth $600 billion, money supply would decrease by?

Suppose a central bank has a required reserve ratio of 6.6% for all banks and the central bank changes reserves at one of these banks by $536.  By how much will the money supply change, at most, after all the effects of the money multiplier?  (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)

Assume we have an economy in which banks would hold 25% of their deposits as reserves. Initially, deposits are $7,000 and currency is $1,000. Now the central bank purchases $500 of bonds from the public, using new currency. a) Illustrate the first three rounds of deposit creation, assuming that public would like to continue to hold $1,000 of currency. PLEASE incorporate the fact that the central bank purchases $500 of bonds from the public, using new currency. b) What will money supply ultimately be in this case? c) Repeat the analysis in (a), but now assume that the public would like to hold a constant ratio of currency to deposits. Briefly explain why the two results are different.