Money supply at each stage as well as after entire process

Assignment Help Business Economics

Reference no: EM13996185

Suppose that the council of economic advisers to President Clinton recommends financing an increase in government spending on infrastructure by $30 billion through raising taxes on individuals with an annual income of more than $100,000. By using the T-accounts for the non-bank Public, the Treasury, the Banking System, and the Central Bank, demonstrate the impact of the implementation of this plan on bank reserves and on the supply of money. Distinguish between the three stages below and show what happens to reserves and to the Money Supply at each stage as well as after the entire process is completed. Use (+) and (-) signs or arrows to indicate the direction of the change and the amount of the change on each T-account. Assume that the public pays the taxes with checks.

a. When taxes are collected:

____Public _ __Treasury__ __Banking System__ __Central Bank__

Reserves: Money Supply:

b. When deposits are transferred from the Banking System to the Fed: (1/20 point)

____Public _ __Treasury__ __Banking System__ __Central Bank__

Reserves: Money Supply:

c. When the treasury spends the collected funds on infrastructure: (1/20 point)

____Public _ __Treasury__ __Banking System__ __Central Bank__

Reserves: Money Supply:

d. The ultimate impact on reserves and the money supply is: Reserves:

Money Supply:

Reference no: EM13996185

Questions Cloud

What would you expect to happen in the currency market : A Big Mac costs $5 in the U.S. and 7 euros in Germany. If the exchange rate is 0.6 Euros per dollar, is the dollar undervalued or overvalued against the Euro? What would you expect to happen in the currency market? What objection do you have to using..

How to split their time between writing music and lyrics : Bob and Karl are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 hours of work are shown below. Bob and Karl have to write music for 8 songs and lyrics for 12 songs (4 songs already have music)..

Present value of the perpetual harvest income stream : A forest stand yields a recurring timber harvest income of $15,000 that occurs every 45 years. Using a 7% interest rate, find the present value of the perpetual harvest income stream assuming that the first income occurs 45 years from now.

Why do electrophiles have good leaving groups : Why do electrophiles have good leaving groups? how come nucleophiles dont have good leaving groups?

Money supply at each stage as well as after entire process : Suppose that the council of economic advisers to President Clinton recommends financing an increase in government spending on infrastructure by $30 billion through raising taxes on individuals with an annual income of more than $100,000. Distinguish ..

What kinds of aromatics will not react : What kinds of aromatics will not react with CHCl3/AlCl3?

What is the monthly payment on the mortgage : The 30 minute-year mortgage on a $20,000 house that carries a 3% annual interest rate. What is the equivalent monthly interest rate (show in percentages with two decimals) What is the monthly payment on the mortgage?

Investments reported as noncurrent assets : Unrealized gain (or loss) component of accumulated other comprehensive income in shareholders' equity.

A mother calls you to ask about a proper dosage : A mother calls you to ask about a proper dosage of cough medicine for her 2 year old. The bottle says to administer 5.0 mg/kg three times a day for children under 3 years of age. The cough syrup is supplied in a liquid that contains 50.0 mg/mL. How m..

User Account

All Pages