Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 35, Problem 8DQ
To determine
Excess reserves and the relationship between monetary multiplier and reserve ratio.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following statements is true about bonds?
1) A bond's dollar price is calculated as a growth rate.
2) The dollar price and interest rate of a bond have a positive relationship.
3) Bonds can never default.
4) The dollar price and interest rate of a bond have an inverse relationship.
5) Bonds are ownership shares in a firm.
0
Question 16
Suppose the following:
• Smokey Bank has total deposits of $600,000.
In addition, it currently has outstanding loans in the amount of $400,000
Finally, the required reserve ratio is 15%.
.
.
What is the money multiplier?
O 0.90
0.10
090
15
O 6.67
Suppose that a small country currently has $4 million of currency in circulation, $6 million of checkable deposits, $200 million of
savings deposits, $40 million of small-denominated time deposits, and $30 million of money market mutual fund deposits.
From these numbers we see that this small country's MI money supply is
, while its M2 money supply is
O $250 million; $270 million
$210 million; $280 million
$10 million; $270 million
$10 million; $280 million
Chapter 35 Solutions
Economics (Irwin Economics)
Knowledge Booster
Similar questions
- Using the simply multiple deposit multiplier model, if the Federal Reserve Bank wants lending to increase by $4,500, and th required reserve ratio is 5%, how much do they need to increase reserves by? O 225 O 205 O 270 O 255arrow_forwardQUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.arrow_forwardSuppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? $70,000; 700,000. O $100,000; $1,900,000. $90,000, $900,000. O $10,000; $100,000.arrow_forward
- The following information is for the entire banking system. Assume that banks are fully loaned up (banks hold only required reserves and make the maximum allowed amount of loans). Assume also that there is no currency leak, Required Reserves Ratio =16% Currency held outside of the banking system - 1.200b Deposits = 1.800b The Fed buys 320b in bonds from the public. The NEW money supply equals None of these answers is correct 1,000b O4.0886 5.000b 2.000barrow_forwardTable 29-4 Reserves Loans 6.0 6.4 15.6 Assets O 16.7 Bank of Pleasantville Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier? $3,000 Deposits 47,000 Liabilities $50,000arrow_forwardRefer to the table below. Item Dollars In Billions Checkable Deposits $600 Small Time Deposits $700 Currency $500 Money-Market Mutual Funds Held by Businesses $1,200 Savings Deposits and Money-Market Deposit Accounts $2,500 Money-Market Mutual Funds Held by Individuals $800 What is the size of the M1 money supply? O $800 O $2,600 O $1,900 O $1,100arrow_forward
- Using the simply multiple deposit multiplier model, the Federal Reserve Bank desires to increase the size of checkable deposits by $50,500. If the required reserve ratio is 5%, then the Fed needs to purchase worth of securities in the open market. O $2,445 O $2,650 O $2,525 O $2,500arrow_forwardSuppose there is an upswing in the economy with a large demand for finance to invest by the residential and non-residential building sector such that lending by all banks increases by $250 billion. On the assumption the reserve (or liquidity) ratio of banks is 12% this expansion in economic activity will result in an endogenous increase of O $20 billion of reserves and $230 billion of bank deposit money O $34.1 billion of reserves and $284.1 billion of bank deposit money O $20 billion of reserves and $270 billion of bank deposit money O $26.2 billion of reserves and $276.2 billion of bank deposit moneyarrow_forwardSuppose the reserve ratio of a bank is 0.125 and the Fed buys $10 billion worth of government bonds. What is the maximum impact this has on the money supply? O $80 billion O-$15.625 billion $15.625 billion O $125 billionarrow_forward
- Item Dollars Checkable Deposits Small Time Deposits Currency Money-Market Mutual Funds Held by Businesses Savings Deposits and Money-Market Deposit Accounts Money-Market Mutual Funds Held by Individuals In Billions $600 $700 $500 $1,200 $2,500 $800 What is the size of the M1 money supply? O $800 O $1,900 O $1,100 O $2,600arrow_forwardSuppose the value of a bank's variable-rate assets is_______ million, and the value of its variable-rate liabilities is $100 million. Since this bank has a negative gap, in market interest rates will decrease bank profits. Select one: O $150; an increase O $150; a decrease $50; a decrease $50; an increasearrow_forwardTable 29-6. Reserves Loans O $106,000 O $60,000 O $72,000 Assets O $50,200 Bank of Springfield $19,200 228,000 Refer to Table 29-6. Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase? Deposits Liabilities $240,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning