Reference no: EM131159467
The questions on this homework deal with an economy called Economica. This economy contains a total of two banks; I've included partial balance sheet information for each below. To avoid each question becoming huge, I won't repeat this information for future questions.
Bank One:
$1,500 cash within the bank
$3,000 Deposit in the Fed
$6,000 equity (capital)
$12,000 saving deposits
$16,000 checking deposits (DD)
Bank Two:
$2,000 cash within the bank
$3,500 Deposit in the Fed
$8,000 equity (capital)
$15,000 savings deposits
$20,000 checking deposits (DD)
Residents in this economy hold $6,000 in cash. The reserve requirement ratio is the same as we've used on all graded assignments.
You can safely assume that all banks must keep 10% of DD as required reserves.
Calculate the economy-wide currency ratio. Because precision is very important with the multiplier and its components, round your final answer and any intermediate steps to THREE decimal places. Do NOT convert your answer into percent. You must follow these instructions to receive credit for your answer.
|
Economy monetary base by combining actual-potential reserves
: The questions on this homework deal with an economy called Economica. Calculate this economy's monetary base by combining actual and potential reserves. Note that the base is an economy-wide variable. Carefully follow all numeric instructions.
|
|
Understand why positive unexpected inflation is associated
: What is the Phillips curve? Understand why positive unexpected inflation is associated with a negative output gap and vice-versa. Understand why combining the Phillips Curve with adaptive expectations of inflation means that Y above Y* will mean ever..
|
|
Banks keep fractional reserves against deposit liabilities
: In a world where the public holds no currency but where banks keep fractional reserves against deposit liabilities, explain how an injection of new base--say from The Fed’s purchase of securities-- lead to new M1 which is a multiple of the new base. ..
|
|
Between stability and the absence of moral hazard
: What are the two methods the FDIC has of handling bank failures. Compare and contrast these two. Which tends to be the most costly and why? Explain the trade-off, in bank regulation, between stability and the absence of moral hazard. In what ways did..
|
|
Calculate the economy-wide currency ratio
: The questions on this homework deal with an economy called Economica. Calculate the economy-wide currency ratio. Because precision is very important with the multiplier and its components, round your final answer and any intermediate steps to THREE d..
|
|
How does fractional-reserve banking work
: How is money created? How does fractional-reserve banking work? What is the monetary base? What is the currency ratio. Understand Friedman’s equation for explaining changes in the money supply. What is the currency ratio and how does it effect the mo..
|
|
Opportunity cost is key concept in economics
: Opportunity cost is a key concept in Economics. The textbook defines the opportunity cost as the best alternative that must be given up to obtain some item. Suppose you are a music fan. Lucky enough, you won a free ticket to see a local rock-band con..
|
|
Trade-off between stability and low moral hazard
: Explain the trade-off between stability and low moral hazard that characterizes bank regulation. What was the savings and loan crisis and how is it a case study of general problems in regulating banks?
|
|
Consider two fictional economies
: Consider two fictional economies, one called the domestic country and the other called the foreign country. Given the transactions listed below, construct a balance of payments account for each county. Include a statistical discrepancy.
|