Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 25, Problem 5SPA
(a)
To determine
Determine the value of monetary base and the quantity of money.
(b)
To determine
Determine the bank’s desired reserve ratio and the currency drain ratio.
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Students have asked these similar questions
In the economy of Nocoin the banks have deposits of $300 billion. Their reserves are $36 billion, two thirds of which is in deposits with the central bank. Households and firms hold $24 billion in bank notes (dollar bills). There are no coins!
Calculate the monetary base and the quantity of money.
Calculate the banks' desired reserve ratio and the currency drain ratio (as percentages).
The monetary base is $ billion.
The quantity of money is $ billion.
The banks' desired reserve ratio is percent.
The currency drain ratio is
percent
Which of the following aren’t counted in the money supply of the US?
a.Coins
b.Travelers checks
c.Commodities
d.Debit accounts
e. Currency
Imagine that the Bank of Canada creates $1,000 of new money. Canadians do not hold any of their money in currency. The
reserve requirement is 20% and banks like to hold 5% excess reserves.
a) Calculate the total of new deposits created from this $1,000 of new money.
b) Calculate the new money supply created form this $1,000 of new money.
Chapter 25 Solutions
Macroeconomics
Ch. 25.1 - Prob. 1RQCh. 25.1 - Prob. 2RQCh. 25.1 - Prob. 3RQCh. 25.1 - Prob. 4RQCh. 25.1 - Prob. 5RQCh. 25.2 - Prob. 1RQCh. 25.2 - Prob. 2RQCh. 25.2 - Prob. 3RQCh. 25.2 - Prob. 4RQCh. 25.2 - Prob. 5RQ
Ch. 25.3 - Prob. 1RQCh. 25.3 - Prob. 2RQCh. 25.3 - Prob. 3RQCh. 25.3 - Prob. 4RQCh. 25.3 - Prob. 5RQCh. 25.4 - Prob. 1RQCh. 25.4 - Prob. 2RQCh. 25.4 - Prob. 3RQCh. 25.5 - Prob. 1RQCh. 25.5 - Prob. 2RQCh. 25.5 - Prob. 3RQCh. 25.5 - Prob. 4RQCh. 25.5 - Prob. 5RQCh. 25.6 - Prob. 1RQCh. 25.6 - Prob. 2RQCh. 25.6 - Prob. 3RQCh. 25.6 - Prob. 4RQCh. 25 - Prob. 1SPACh. 25 - Prob. 2SPACh. 25 - Prob. 3SPACh. 25 - Prob. 4SPACh. 25 - Prob. 5SPACh. 25 - Prob. 6SPACh. 25 - Prob. 7SPACh. 25 - Prob. 8SPACh. 25 - Prob. 9SPACh. 25 - Prob. 10APACh. 25 - Prob. 11APACh. 25 - Prob. 12APACh. 25 - Prob. 13APACh. 25 - Prob. 14APACh. 25 - Prob. 15APACh. 25 - Prob. 16APACh. 25 - Prob. 17APACh. 25 - Prob. 18APACh. 25 - Prob. 19APACh. 25 - Prob. 20APACh. 25 - Prob. 21APACh. 25 - Prob. 22APACh. 25 - Prob. 23APACh. 25 - Prob. 24APACh. 25 - Prob. 25APACh. 25 - Prob. 26APACh. 25 - Prob. 27APA
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Similar questions
- B. In the economy of Nocoin, Bank deposits are $300 billion, bank reserves are $15 billion of which two-thirds are deposits with the central bank. Households and firms hold $30 billion in bank notes. There are no coins. Calculate: i. The monetary base and quantity of money. ii. The banks' desired reserve ratio and the currency drain ratio (as percentage).arrow_forwardIn the economy of Robberia, the monetary base is $3500. People hold 40% of their money in the form of currency (and thus 60% as bank deposits). Banks hold 20% of their deposits in reserve. What are the reserve‑deposit ratio, the currency‑deposit ratio, the money multiplier, and the money supply?arrow_forwardMoney is any commodity or token that is _______. Money consists of _______.arrow_forward
- The economy of Elmendyn contains 2000 $1 bills. a) If people hold all money as currency, what is the quantity of money supply ? b) If people hold all money as demand deposit and banks maintains 100% reserves what is quantity of money? c) if people equal amount of currency and demand deposits and bank maintains 100% reserves, what is quantity of money? d) If people hold all money as demand deposits and bank maintaines reserve ratio of 10% what is the quantity of money? e) If the people holds equal amount of currency and demand deposit and banks maintains reserve ratio of 10%, what is the quantity of money?arrow_forwardGive typing answer with explanation and conclusion All else the same, the money supply will increase if the Group of answer choices Money base decreases. Reserve-deposit ratio increases. Discount rate increases. Currency-deposit ratio decreases.arrow_forwardIn the economy of Waco, the monetary base is $3150. People hold 30% of their money in the form of currency (and thus 70% as bank deposits). Banks hold 15% of their deposits in reserve. What are the reserve‑deposit ratio, the currency‑deposit ratio, the money multiplier, and the money supply?arrow_forward
- Which definition of the money supply includes credit cards?arrow_forwardExplain the different determinants of money supply in a country.arrow_forwardOnly one of the following is part of the money supply. Which is it? Select one: A. Gold. B. Available credit on people's credit cards. C. Currency in a bank's vault. D. Demand deposits..arrow_forward
- In the U.S., currency in circulation (C) is $1.2 trillion and the monetary base (B) is $3.7 trillion. Assume the reserve-deposit ratio (rr) and the currency-deposit ratio (cr) are both 0.25. What is the size of bank reserves (R)? What is the money multiplier? What is the money supply? What is the velocity of money if nominal GDP is $17 trillion? If the FOMC increases bank reserves (R) by $0.5 trillion and banks choose to hold all the additional reserves rather than loan them out, what is the new money supply? What is the new money supply if instead banks loan out 50% of the additional new reserves and households deposit all the additional loans? Assume that the velocity of money is constant and real GDP is growing at 1%. Use the numbers in part (a) to answer the next question. If the Fed wishes to keep the price level constant, how much (in dollars) do they need to increase the money supply?arrow_forwardIn Country Wise, households and firms want to keep a currency to deposit ratio, c, of 0.20, while banks want to keep a required deposits ratio, r, of 0.10. Banks in this country keep no excess reserves. The price level stands at 1, or 100%, and the money base is $40 billion. a. Calculate the money multiplier. b. What is the money supply? c. How much of the money supply will be held in the form of currency? In the form of bank deposits?arrow_forward
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