The Agricolan monetary base is 800,000 florins. The public always holds half its money as currency and half as deposits Banks hold 25% of deposits in the form of reserves. Starting with the initial creation of a monetary base that accompanies the purchase by the central bank of 800,000 fl worth of securities from the public, answer the following questions (Hint: Don't forget that the public keeps only half its money in the form of bank deposits and the other half as currency) Fill in the consolidated balance sheet of the banks after they first receive deposits. (Enter all values rounded to the nearest whole number.) Assets Reserves Consolidated Balance Sheet of Banks (fl) Deposits Liabilities

Introduction to Macroeconomics Required Reserves and the Money Multiplier When a bank receives a deposit, it must set aside part of it according to the established reserve requirement. The remaining funds are excess reserves and can be lent out, In our economy of multiple banks, it is very likely that the proceeds of the loan will end up on deposit at another bank. When that happens, the process repeats itself: The bank sets aside required reserves and can lend out its excess reserves. The result is the money multiplier process. Use the table that follows to learn more about this process. The table begins with an initial deposit of $1,000 to one bank and assumes a required reserve ratio of 15%. Assume the amount lent by one bank is always deposited in another. 1. Calculate the amount of required reserves, excess reserves, and lending at each step in the process. The first boxes of the table are filled in to get you started. Continue until you have filled in five rows of numbers. 2. Now…

Consider two countries, Canada (Home) and US (Foreign). In 2018, Canada experienced relatively slow output growth (2%), whereas US had relatively robust output growth (4.2%). Suppose the Bank of Canada allowed the money supply to grow by 2% each year, whereas the Federal Reserve (Fed), the US central bank, chose to maintain relatively high money growth of 10% per year. For the following questions, use the simple monetary model (where I is constant).Consider the general monetary model, in which L is no longer assumed constant and money demand is inversely related to the nominal interest rate. In addition to the scenario described in the beginning of the question, the bank deposits in Canada pay 3% interest. Suppose the Fed increases the money growth rate from 10% to 12% and the inflation rate rises proportionately (one for one) with this increase. Using time series diagrams, illustrate how this increase in the money growth rate affects the US money supply, interest rate, prices, real…

Scenario 29-1 The Monetary Policy of Jaune is controlled by the country's central bank known as the Bank of Jaune. The local unit of currency is the Jaunian dollar. Aggregate banking statistics show that collectively the banks of Jaune hold $240 million of required reserves, $60 million of excess reserves, have issued $6,000 million of deposits, and hold $480 million of Jaunian Treasury bonds. Jaunians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Jaunian Banks? O 5 percent, 8 percent 4 percent, 8 percent 4 percent, 5 percent 5 percent, 4 percent

For all questions assume the following starting point: The money supply (M) is composed of currency (C) held by the non-bank private sector (NBPS) and demand deposits (DD) held at banks. Banks are required to hold cash reserves (CR) equal to 10% of their demand deposit liabilities. The remainder of the bank’s DD liabilities is backed by loans (L). Initially, banks have 2000 in cash reserves and the NBPS holds 500 in currency. Currently, banks not hold excess reserves.   a. What are the initial values for DD, L, and M?   DD= $20,000 L= $18,000 M= $5,000   b. What happens to the values in part a, if the NBPS decides to hold an additional 200 in currency?   DD = 20,000, L = 18,000, M = 20,700   c. What would happen to the values in part a if banks decided to hold 2.5% excess reserves?   DD = 20,000, L = 17,500, M = 20,500   d. What happens to the values in part a if concerns about the economy's future caused both b and c to happen? DD = 20,000, L = 17,500, M = 20,700 Given the results in…

Let’s assume that the nominal Gross Domestic Product, GDP, of a hypothetical country is $45,000 and that the velocity of money of this country is 5. This implies that the money supply, in this country, is:

All other things being equal, by how much will nominal GDP expand if the central bank increases the money supply by $110 billion, and the velocity of money is 3.2? (Enter your answer in billions of dollars. That is, if you find an expansion of 1 billion enter 1 for your answer.)

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Use the Quantity Theory of Money equation to solve the following: If the velocity of circulation is constant, real GDP is growing at 4.5 percent a year, the real interest rate is 2.1 percent a year, and the nominal interest rate is 5.7 percent a year. What is the growth of nominal GDP? Hint: Recall that nominal GDP=PxY

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.