Does have excess reserves or is short of reserves

Assignment Help Econometrics

Reference no: EM13205513

Consider the following balance sheet of Princeton Bank: Assets- Reserves 30, Securities 140, Loans 280, total assets 450. Liabilities+ Capital- Transactions deposits 300, Nontransactions deposits 140, Capital 10, total liabilities + capital 450.

Of Princeton Bank's reserves, $6 million are required clearing balances held at the Federal Reserve Bank of Philadelphia. Statistics for the economy as a whole are D= $2,000 billion, R= $200 billion, C/D= 0.2=ratio of currency to transactions deposits, N/D= 2.0= ratio of nontransactions deposits to transactions deposits, MMF/D = 1.6 = ratio of retail money-market mutual funds to transactions deposits, q = 0.08 = 8% = required reserve ratio on transactions deposits = RR/D = ratio of required reserves to transactions deposits RCB/D = 0.02 = 2%= ratio of required clearing balances to transactions deposits.

A- Calculate the monetary base MB, M1, and M2. Are there any excess reserves in Princeton Bank? Are there any excess reserves in the economy as a whole?

B- Calculate the multipilers for M1 and M2.

C- Calculate the values of N, D, C, R, MMF, and RCB using the fact that C/D = 0.2 and C + D = M1.

D- Suppose that the Fed raises the reserve requirement on transactions deposits to 0.18 = 18%. What happens to Princeton Bank's balance sheet? Does it have excess reserves, or is it short of reserves? Calculate the new M1 and M2 multipliers. What happens to MB, M1, M2, N, D, C, MMF, RCB, and R ?

E- Suppose that instead of raising the reserve requirement as in part c, the Fed sells $150 billion of securities in the open market, including $30 million to a customer of Princerton Bank. What happens to Princeton Bank's balance sheet? Does it have excess reserves, or is it short of reserves? Calculate the new M1 and M2 multipliers. What happens to MB, M1, M2, N, D, C, MMF, RCB, and R?

Reference no: EM13205513

Questions Cloud

What federal funds rate should the fed now set : The federal funds rate is currently 3%. The equilibrium real federal funds rate is 3%, and the weights on the output gap and inflation gap are 0.5 each. The inflation target is 1%. Suppose that a year has gone by, output is now just 1% above poten..

Use lagrange multipliers to find the given extremum : Use Lagrange multipliers to find the given extremum. In each case assume that x and y are positive.

What money growth rate should the fed aim : Suppose that the Fed's inflation target is 2%, potential output growth is 3.5%, and velocity is a function of how much the interest rate differs from 5%: %^V= 0.5 X (i-5). Suppose that a model of the economy suggests that the real interest rate.

Develop a spreadsheet to perform a cost benefit analysis : Develop a spreadsheet to perform a cost benefit analysis to determine how much the company will make or lose over the next five years for each project and what is the company's annual return on investment for each project

Does have excess reserves or is short of reserves : Statistics for the economy as a whole are D= $2,000 billion, R= $200 billion, C/D= 0.2=ratio of currency to transactions deposits, N/D= 2.0= ratio of nontransactions deposits to transactions deposits, MMF/D = 1.6 = ratio of retail money-market mut..

By how much will the area of the square be increased : A square support unit in a television is made with a side measuring 10 centimeters. A new model being designed for the upcoming year will have a larger square with a side measuring 10.3 centimeters. By how much will the area of the square be incre..

What are the values given a required annual rate : Would it preferable to receive daily payments rather than quarterly or semi-annually and what are the following values given a required annual rate of 5%?

Compute the volume of the solid generated by revolving : Compute the volume of the solid generated by revolving the triangular region bounded by the lines

Find the probability that a randomly selected adult : Assume that adults have normally distributed IQ scores with a mean of 100 and a standard deviation of 15 find the probability that a randomly selected adult has an IQ score between 67 and 133.

User Account

All Pages