User Account

All Pages

Required reserve-deposit ratio for demand deposit

Assignment Help Macroeconomics
Reference no: EM131250981

Suppose M2 is defined as follows: M2 = C + D + T 

where C = currency in circulation D = demand deposit 

T = saving and time deposits

Suppose the required reserve-deposit ratio for demand deposit (rd) is greater than that of saving and time deposits (rt). Let k be the cash to total deposits ratio; t be ratio of saving and time deposits to total deposits; and e be the excess reserve to total deposits ratio. Derive the money multiplier for M2 in terms of k, rd, rt, t and e. What happen to the multiplier and money supply if 

  1. innovations in the payment systems has reduced the public's optimal cash to total deposits ratio; 
  2. asset inflation has induced the banks to run down excess reserves, but a subsequent outbreak of a financial crisis force or induce (i) the banks to hold more excess reserves; and (ii) the publics to hold more cash; 
  3. a removal of a cartel in saving and time deposit rates determination (similar to the case in Hong Kong) so that saving and time deposit rates rise with increased competition while demand-deposit rate remains under the control of the cartel.

Reference no: EM131250981

Questions Cloud

After thorough survey of audio system markets : Bell Company, a manufacturer of audio systems, started its production in October 2014. For the preceding 3 years, Bell had been a retailer of audio systems. Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost i..
What is special about the game of chicken : What is the difference between a dominant strategy and a dominated strategy? Why would a player in a game be unlikely to choose a dominated strategy?
What are advantages of storing data in a dbms like access : Some people like to store their information in Excel files. What are the advantages of storing data in a database management system like Access over Excel? Name 3.
Write memo in which you communicate a negative message : Write a 1- to 2-page formal letter or memo in which you communicate a negative message. You may select from one of the following scenarios: Tell your investors or employees about a recent decrease in your company's stock value
Required reserve-deposit ratio for demand deposit : Suppose the required reserve-deposit ratio for demand deposit (rd) is greater than that of saving and time deposits (rt). Let k be the cash to total deposits ratio; t be ratio of saving and time deposits to total deposits; and e be the excess rese..
Difference between a pure strategy and a mixed strategy : 1. Can a game have a Nash equilibrium even though neither player has a dominant strategy? Can a game have a Nash equilibrium even though neither player has a dominated strategy? 6. What is the difference between a pure strategy and a mixed strateg..
How to increase profits and customer retention : (ESPU 200) - Use your dictionary to check spellings, and check your writing carefully for mistakes before you hand it in. Write at least 200 words and
Consider the regression model : i) Let B-hat denote an estimator of B that is constructed as B-hat = Y-bar/X-bar, where Y-bar and X-bar are the sample means of Yi and Xi, respectively. Show that B-hat is conditionally unbiased.
Write two response paragraphs on the gvien film : Write two response paragraphs on the films 1960's: the years that shaped a generation and alice's restaurant as they relate to the social science themes

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd