Reference no: EM133124188
Suppose that currency in circulation is $800 billion, the amount of checkable deposits is $1200 billion, the required reserve ratio is 10% and excess reserves are $12 billion.
a. Calculate the money supply, the currency-to-deposit ratio, the excess reserve ratio, and the money multiplier.
b. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $2000 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) remain the same, predict the effect on the money supply.
c. Suppose the central bank conducts the same open market purchase as in part (b), except that banks choose to hold all of these proceeds as excess reserves rather than loan them out, due to fear of a financial crisis and bank run. Assuming that currency and deposits remain the same, what happens to the amount of excess reserves, the excess reserve ratio, the money supply, and the money multiplier?
d. Go to the FRED web site and graph the Fed's M1 multiplier from January 1995 to December 2016. How does the scenario in part c relate to the graph you created? Include your graph in your submission.
|
What is the current cost of the motorcar to florida motors
: A Toyota motorcar manufactured in Japan costs ¥1,500,000. What is the current cost of the motorcar to Florida Motors
|
|
How did the panic of 1901 crisis unfold
: How did the Panic of 1901 crisis unfold? Provide a timeline, some context, and a discussion of the major events of the crisis. Explain how, and why, the financi
|
|
Majority of artists coming from the elite group
: 1. Why do we see majority of artists coming from the elite group?
|
|
What is the economic reason
: What is the economic reason why people are required to buy car insurance and health insurance? Your answer should include a discussion of adverse selection.
|
|
Market purchase of bonds
: Suppose that currency in circulation is $800 billion, the amount of checkable deposits is $1200 billion, the required reserve ratio is 10% and excess reserves a
|
|
Case of collaborative technologies and virtual team
: Discuss additional rules that could be added to facilitate collaboration between virtual team members
|
|
What the predetermined overhead rate
: Estimated variable manufacturing overhead $ 3.01 per machine-hour. What the predetermined overhead rate for the recently completed year
|
|
Maintain unbalances for a long time
: During your mission to Surfland, you met with President Kelly Medina and found out that Surfland's debt to gdp ratio went from 127 % in 2009 to 181 % in 2018, a
|
|
Relative prices of certain goods
: Explain how income, tastes and fashions, taxes, subsidies and relative prices of certain goods affect household spending.
|