Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 31, Problem 1TY
To determine
The velocity of money.
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One limitation of using money as a store of value is that:
a) money needs to be divisible and portable
b) money loses value over time due to inflation
c) money is not readily acceptable everywhere in return for goods and services
d) money is not very liquid
Your answer is incorrect.
The economy of Greatstown currently has $60.00 million worth of currency in circulation, $2.00 million worth of traveler's
checks, $5.00 million in small time-deposits, and $30.00 million in savings deposits. Total M1 is equal to $120.00 million.
Calculate the amount of checkable deposits in Greatstown: 58000000
Evaluate the following as suitable forms of money in the U.S. using the desirable features of money, which include (1) durability; (2) valuable in small sizes and weights; (3) divisible; (4) easily verified as genuine; and (5) stable in value.
The Chilean peso
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Similar questions
- Evaluate the following as suitable forms of money in the U.S. using the desirable features of money, which include (1) durability; (2) valuable in small sizes and weights; (3) divisible; (4) easily verified as genuine; and (5) stable in value. Silver ingots Packs of cigarettes A cryptocurrency, such as Bitcoin Large limestone blocks carved into wheels, each weighing over 500 lbs. Bananas Almonds The Chilean pesoarrow_forwardCalculate Total Potential Deposit Creation given the following information. rrr = .09 Total Deposits: $6300 Total Reserves: $4200arrow_forwardCalculate Total Potential Deposit Creation given the following information. rr = ,12 Total Deposits: $6300 Total Reserves: $5500 Instructions: Please calculate to two decimal points. The margin of error is 0.10. do not use the $ sign in your answerarrow_forward
- Research and identify two cryptocurrencies, how they have evolved in recent years and how might you expect them to evolve further in the future. Discuss whether these means of “payment” fully fulfil all three functions of “money.” (Your answer should be 600 words ±10%)arrow_forwardIn defining money as M1, economists exclude time deposits because: the intrinsic value of time deposits is nil. the purchasing power of time deposits is much less stable than that of checkable deposits and currency. they are not directly or immediately a medium of exchange. they are not recognized by the Federal government as legal tender.arrow_forwardWhat are the three functions of money in an economy? How does Bitcoin measure up to each standard? What will it take for Bitcoin to be used as a currency? What obstacles are there? If Bitcoin were able to be used for currency at most stores or taken for payment online, would you be more likely to use it? Why or why not? Since online and digital transactions are now commonplace, why would Bitcoin (or another cryptocurrency) be needed for everyday use? Doesn't Apple Pay, PayPal or Google Pay do the same things? How are they different? Do you feel it has a place as an alternative to traditional currencies or is it just a speculative asset? And finally, if Bitcoin is a 'currency' - is it like Yen? Or Euros? Or the Dollar? How is it different?arrow_forward
- Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 25%. The Federal Reserve buys a government bond worth $1,800,000 from Felix, a customer of First Main Street Bank. He deposits the money into his checking account at First Main Street Bank. Now, suppose First Main Street Bank loans out all of its new excess reserves to Deborah, who immediately writes a check for the full amount to Carlos. Carlos then immediately deposits the funds in his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Larry, who writes a check to Janet, who deposits the money in her account at Third Fidelity Bank. Finally, Third Fidelity lends out all of its new excess reserves to Megan. Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $1,800,000 injection…arrow_forwardSuppose on your 21st birthday, your eccentric grandmother invites you to her house, takes you into her library, removes a black velvet painting of Elvis Presley from the wall, opens a hidden safe where she removes 50 crisp $100 bills, and hands them to you as a present, claiming you are her favorite grandchild. After thanking your grandmother profusely (and helping her rehang the picture of Elvis), you proceed to your bank and deposit half of your gift in your checking account and half in your savings account. How will these transactions affect M1 and M2? How will these transactions change M1 and M2 in the short run? What about the long run?”arrow_forwardI deposited Rs. 3 million of my money in a Habib Bank Limited, State Bank of Pakistan: Required rate of reserve ratio (RRR): Weekly Average Demand Liability was set as 10.0 % in June 2020. You are required to calculate the change in the money supply in the economy. If RRR decreased to 5% in August 2020, what will happen with the same deposit of Rs. 3 million. You are also required to compare and discuss it in few lines. (150 words) Answer: Evaluate the policy options open to a government when the Government wants to close a deflationary gap (negative output gap) and reduce unemployment. (200 words)arrow_forward
- I deposited Rs. 3 million of my money in a Habib Bank Limited, State Bank of Pakistan: Required rate of reserve ratio (RRR): Weekly Average Demand Liability was set as 10.0 % in June 2020. You are required to calculate the change in the money supply in the economy. If RRR decreased to 5% in August 2020, what will happen with the same deposit of Rs. 3 million. You are also required to compare and discuss it in few lines. Q-3. (B). Evaluate the policy options open to a government when the Government wants to close a deflationary gap (negative output gap) and reduce unemployment.arrow_forwardIf total deposit with post office is $31,000 and M4 is $19,000 Calculate M3arrow_forwardCalculate the Required Reserves given the following information. rr = .11 Total Deposits: $7200 Total Reserves: $3500 Instructions: Whole numbers only. No margin for errorarrow_forward
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