a. In an economy, firms tend to hold 25% of output as inventory. If in a period 1, total output is 400 units, calculate the stock of inventory in that period. If production increases by 50% in the following period, calculate inventory investment over the two periods. b. The economy is also characterised by the following features; Total deposits = $250,000,Total currency in circulation = $45,000; and Total reserves = $25,000. Given the information above: Calculate the money multiplier. Calculate the money supply.

a. In an economy, firms tend to hold 25% of output as inventory. If in a period 1, total output is 400 units, calculate the stock of inventory in that period. If production increases by 50% in the following period, calculate inventory investment over the two periods. b. The economy is also characterised by the following features; Total deposits = $250,000,Total currency in circulation = $45,000; and Total reserves = $25,000. Given the information above: Calculate the money multiplier. Calculate the money supply.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Monetary System

Section: Chapter Questions

Problem 12PA

See similar textbooks

Similar questions

Which of the following must remain stable if money is to successfully function as a store of value? a. The exchange rate b. The net of interest c. Prices d. Employment
To say an asset is liquid implies that: a. We are only considering U.S. currency b. We are considering any asset that can be sold c. We are focusing on a category of assets that are in a physically liquid form, like oil d. We are considering assets that may be readily converted into a means of payment
1. Suppose velocity is 3, real output is 9000, and the price level is 1.5. What is the level of real money balances in this economy? 2. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of reserves in this economy? 3. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of the money multiplier in this economy? Please answer the three questions above (and highlight the answer if you can). Please explain the math/reasoning used
1. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of reserves in this economy? 2. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of the money multiplier in this economy? Please let me know the right answer as well the reasoning behind it. Explain it to me in simple terms. If you can please highlight the answer.
33. Which of the following is a function of money? a. a unit of account b. medium of exchange c. a store of value d. All of the above are correct.
Households Deposit the $20,000 at "Firstbank." Initially, let's say they have zero capital. Suppose banks hold 5% of deposits in reserve, making loans with the rest. Fill in the follow- ing table. Second Bank's Balance Sheet Assets Reserves: Loans & Investments: (a) Did the money supply increase? (b) If so, by how much? Liabilities & Capital Deposits: Capital:
In an economy, the banks prefer to keep 25% of their deposits in reserve. The population likes to keep their currency holdings equal to 10% of the deposits. Initially, there was zero money in the economy. Then the central bank buys $120 worth of T-bills from a household. The household receives $120 on its checking account. 1. the commercial bank formed reserves and gave out a loan. The population allocated the lent funds between the currency in pockets and checkable accounts. Before anything else happens, how much money is there in the economy at the end of Round 1? ANSWER: 288 For question 1 How is this answer obtained?, How would you solve question 2. 2. In Round 2, more lending, borrowing, and reserve formation takes place. How much is in DEPOSITS in the economy at the end of Round 2?
Fiat currencies only have value based upon exchange, whereas commodity money also has _______________________ value. A. intrinsic B. storage C. appreciation D. long-term
If the Fed makes an open market sale of $1 million of securities to a bank, how do the bank's reserves and excess reserves change? How do bank deposits and the quantity of money change? If the Fed makes an open market sale of $1 million of securities to a bank, the bank's reserves _______. Excess reserves _______. A. increase; increase B. decrease; decrease C. increase; decrease D. decrease; increase Bank deposits _______ and the quantity of money _______. A. increase; decreases B. increase; increases C. decrease; increases D. decrease; decreases
Which of the following statements about money that is correct? A. Credit cards and debit cards are examples of money. B. Inflation brings a rising value of money. C. Without a medium of exchange, goods and services must be exchanged directly for other goods and services. D.
1. When someone moves money from a saving account to a demand deposit, the size of M1 will: a increase c. remain the same b. decrease d. none of the above 2. When someone moves money from a saving account to a demand deposit, the size of M2 will: a increase c. remain the same b. decrease d. none of the above
In Maladonia in 2019, currency held by individuals and businesses was $1,122 billion; traveler's checks in circulation were $5 billion; checkable deposits owned by individuals and businesses were $1,396 billion; small time deposits were $568 billion; money market funds and other deposits were $652 billion; and M2 was, $10,600 billion. Calculate saving deposits in Maladonia in 2019. O $6,857 billion. O $3,523 billion. O $2.523 billion. O $5,857 billion. O $3,287 billion. 4