ECO 2020 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564617
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 36, Problem 7RQ
To determine
Increase in federal funds.
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Suppose there is an upswing in the economy with a large demand for finance
to invest by the residential and non-residential building sector such that
lending by all banks increases by $250 billion. On the assumption the reserve
(or liquidity) ratio of banks is 12% this expansion in economic activity will
result in an endogenous increase of
O $20 billion of reserves and $230 billion of bank deposit money
O $34.1 billion of reserves and $284.1 billion of bank deposit money
O $20 billion of reserves and $270 billion of bank deposit money
O $26.2 billion of reserves and $276.2 billion of bank deposit money
Using the simply multiple deposit multiplier model, the Federal Reserve Bank desires to increase the size of checkable deposits
by $50,500. If the required reserve ratio is 5%, then the Fed needs to purchase
worth of securities in the open market.
O $2,445
O $2,650
O $2,525
O $2,500
Barbara Gordon withdraws $2,750 from her bank account. If the reserve requirement is 19%, by how many dollars must her
bank reduce its lending?
$2,227.50
$522.50
O 2,750
O $1.705
Chapter 36 Solutions
ECO 2020 INCLUSIVE ACCESS
Ch. 36.1 - Prob. 1QQCh. 36.1 - Prob. 2QQCh. 36.1 - Prob. 3QQCh. 36.1 - Prob. 4QQCh. 36.4 - Prob. 1QQCh. 36.4 - Prob. 2QQCh. 36.4 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 1QQCh. 36.5 - Prob. 2QQ
Ch. 36.5 - Prob. 3QQCh. 36.5 - Prob. 4QQCh. 36 - Prob. 1DQCh. 36 - Prob. 2DQCh. 36 - Prob. 3DQCh. 36 - Prob. 4DQCh. 36 - Prob. 5DQCh. 36 - Prob. 6DQCh. 36 - Prob. 7DQCh. 36 - Prob. 8DQCh. 36 - Prob. 1RQCh. 36 - Prob. 2RQCh. 36 - Prob. 3RQCh. 36 - Prob. 4RQCh. 36 - Prob. 5RQCh. 36 - Prob. 6RQCh. 36 - Prob. 7RQCh. 36 - Prob. 8RQCh. 36 - Prob. 9RQCh. 36 - Prob. 1PCh. 36 - Prob. 2PCh. 36 - Prob. 3PCh. 36 - Prob. 4PCh. 36 - Prob. 5PCh. 36 - Prob. 6PCh. 36 - Prob. 7P
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- A headline reads: "Fed Cuts the Federal Funds Rate by Half a Point." This suggests that: 1) The prime interest rate will rise 2) Monetary policy has eased 3) Tax rates have been reduced. O4) The discount rate will risearrow_forwardNeed help. Assume that securitization combined with borrowing and irrational exuberance in Hyperville have driven up the value of asset-backed financial securities at a geometric rate, specifically from $4 to $8 to $16 to $32 to $64 to $128 over a six-year time period. Over the same period, the value of the assets underlying the securities rose at an arithmetic rate from $4 to $6 to $8 to $10 to $12 to $14. If these patterns hold for decreases as well as for increases, by how much would the value of the financial securities decline if the value of the underlying asset suddenly and unexpectedly fell by $6? Instructions: Give your answer as a whole number.arrow_forward1. 2. 3. Which expression describes the flattest money demand schedule? O a. 1=450-2(3) O b. 1=450-9(3) O c. L-5(200)-5(10) O d. L=5(200)-8(10) Which of the following will lead to an increase in the equilibrium interest rate in the money market? O a. Increase in general price level O b. An increase in income O c. Decrease in general price level d. The Central Bank increases money supply Which of the following statements describes the LM curve? O a. It has a negative slope. O b. It describes the relationship between supply and demand of goods. O c. It represents the combination of interest rate and income where the goods market is in equilibrium. O d. None of the abovearrow_forward
- QUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.arrow_forwardSuppose it becomes easier to sell bonds and bonds becomes more liquid relative to money. What would most likely occur? O A. Bond demand will decrease, bond prices will decrease, and the interest rates on bonds will decrease. O B. Bond demand will increase, bond prices will increase, and the interest rates on bonds will increase. O C. Bond demand will increase, bond prices will increase, and the interest rates on bonds will decrease. O D. Bond demand will decrease, bond prices will decrease, and the interest rates on bonds will increase,arrow_forwardSuppose a customer makes a $2,280 cash withdrawal from Bank A. If the reserve requirement was total decrease in the money supply in the 6 percent, the deposit would ultimately lead to a economy, if all banks in the system lend out 100 percent of their excess reserves. O $2,143.20 O $2,280 O $28,500 O $35,720 $38,000arrow_forward
- If Janet expects interest rates to rise in the near future, she will probably be willing to Select one: O a. maintain only the current holding of bonds. O b. O c. buy bonds now, and hold less money. put her money under her mattress rather than in a bank account. O d. buy bonds now, but only if their price falls. O e. sell bonds now, and hold more money.arrow_forwardIn which of the following situations would you prefer to be the lender? 1) Expected inflation rate is 7 percent and the interest rate is 9 percent 2) The interest rate is 25 percent and the expected inflation rate is 50 percent. 3) The interest rate is 13 percent and the expected inflation rate is 15 percent. O 4) The interest rate is 4 percent and the expected inflation rate is 3 percent. O 5) Expected inflation rate is 1 percent and the interest rate is 4 percent O6) None of the answers are correctarrow_forwardSuppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? $70,000; 700,000. O $100,000; $1,900,000. $90,000, $900,000. O $10,000; $100,000.arrow_forward
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