Find the money multiplier and value of a dollar

Assignment Help Business Economics

Reference no: EM13986065

Consider an economy in which people wish to hold bank checking deposits worth a total of 5 million goods and currency worth 2 million goods in every period. In addition there is a stock of unintermediated capital worth 10 million goods. Fiat money is the only asset used as currency. Deposits at banks are subject to a reserve requirement of 20 percent. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. The monetary base is $1 millon. Hint: The key to this exercise is understanding the difference between inside and outside money.

a. Find the value (in goods) of a dollar.

b. Find the total nominal money stock as measured by the Federal Reserve's definition of M1.

c. Find the money multiplier.

d. Find the total capital stock.

e. Find the revenue (in goods) from seignorage if the monetary base triples every period.

f. Suppose people want to keep more of their money balances in the form of cash, although their total demand for money does not change. What will happen to each of your answers to part a to e?

Reference no: EM13986065

Questions Cloud

Statistical discrepancy what is the capital account : What is the current account for the economy below? If there is no statistical discrepancy what is the capital account?

Supply or demand for the dollar and for the euro : Describe what will happen to supply or demand for the dollar and for the euro in each of the following scenarios. Be sure to include whether each currency rises or falls in value.

Exchange rate between the dollar and the euro : The exchange rate between the dollar and the euro is one dollar to .8 euro (€). The price of a Mercedes is € 45,000; the price of a similar size Cadillac is $38,000. What is the euro price of the Caddy? What is the dollar price of the Mercedes?

Management about allocation of capital spending : Two Division managers at King Size Manufacturing have been in a long discussion with top management about allocation of capital spending over the next three years. The current plan up for approval calls for the bulk of capital expenditures to go to D..

Find the money multiplier and value of a dollar : Consider an economy in which people wish to hold bank checking deposits worth a total of 5 million goods and currency worth 2 million goods in every period. In addition there is a stock of unintermediated capital worth 10 million goods. Find the valu..

What is power of the laser beam as it emerges from filter : A 170 mW horizontally polarized laser beam passes through a polarizing filter whose axis is 26o from vertical. Draw a picture that shows the angles, and remember that the angle in Malus' law is between the two polarization axes. Also, while Malus' ..

Compute the present value enter rounded answers as directed : For each of the following, compute the present value (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places.

The order came in the right after the first of the year : The order came in the right after the first of the year, lowering your planned revenue numbers and the bonuses of your very deserving employees. It doesn't seem fair. What should you do?

Complete a detailed case study analysis of the given case : Case Study Analysis: VA Problems. To complete this assignment, review the following Web resource: Congress Slams Miami VA Hospital at Hearing. Complete a detailed case study analysis of the given case

User Account

All Pages