Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00 %, and the Federal Reserve wants to increase the money supply by $20.00 million, the Fed would need to make an open market purchase of $ ___ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ ______ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a larger open market purchase and a larger open market sale. B. a smaller open market purchase but a larger open market sale. C. a larger open market purchase but a smaller open market sale. D. a smaller open market purchase and a smaller open market sale.

Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00 %, and the Federal Reserve wants to increase the money supply by $20.00 million, the Fed would need to make an open market purchase of $ _ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $ ____ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a larger open market purchase and a larger open market sale. B. a smaller open market purchase but a larger open market sale. C. a larger open market purchase but a smaller open market sale. D. a smaller open market purchase and a smaller open market sale.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter13: Money And The Banking System

Section: Chapter Questions

Problem 18CQ

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Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 10.00%, and the Federal Reserve wants to increase the money supply by $20.00 million, the Fed would need to make an open market purchase of $_______ million. (Insert your answer in millions, and round to two decimal places.) Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ratio is 25.00%, and the Federal Reserve wants to decrease the money supply by $70.00 million, the Fed would need to make an open market sale of $________ million. (Insert your answer in millions, and round to two decimal places.) Suppose that banks decide to hold excess reserves. In order for the Federal Reserve to change the money supply by the same amounts as in parts 1 and 2, it would need to make Choose one: A. a larger open market purchase and a larger open market sale. B. a smaller open…
ou just deposited $4,000 in cash into a checking account at the local bank. Assume that banks lend out all excess reserves and there are no leaks in the banking system. That is, all money lent by banks gets deposited in the banking system. Round your answers to the nearest dollar. If the reserve requirement is 1212%, how much will your deposit increase the total value of checkable bank deposits? $ If the reserve requirement is 44%, how much will your deposit increase the total value of checkable deposits? $ Increasing the reserve requirement the money supply.
You take $100 you had kept under your mattressand deposit it in your bank account. If this $100stays in the banking system as reserves and if bankshold reserves equal to 10 percent of deposits, byhow much does the total amount of deposits in thebanking system increase? By how much does themoney supply increase?
In the mid 1800's, grain sellers in Chicago would deliver their grain to warehouses and receive a paper receipt that represented their claim on the grain in storage. These receipts became so widely used that grain traders began to use them as money, and they would use the warehouse receipts to settle debts and as collateral to secure short-term loans. Despite their widespread use as a form of currency, the warehouse receipts were not fiat money because: A. Grain is a commodity, so the receipts were commodity money and not fiat money B. The receipts were not legal tender formally recognized by a government
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In 2007-08, the financial crisis led money multiplier to and the money supply to which would cause the excess reserves ratio to and depositors are likely to their holdings of currency. O decrease; decrease: increase; increase O increase; increase; decrease; decrease: decrease; increase; decrease: increase; O increase; decrease; increase; decrease; « Previous Next Quiz saved at 9:26am Submit Quiz
. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000. If the Bank of Canada requires banks to hold 5 percent of deposits reserves, how much in excess reserves does Nan Bank Inc. now hold?Assume that all other banks hold only the required amount of reserves. IfNan Bank Inc. decides to reduce its reserves to only the required amount, byhow much would the economy's money supply increase?
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How do banks create new deposits by making loans, and what factors limit the amount of deposits and loans they can create? When a bank makes a loan, The amount of loans and new deposits that a bank can create is limited by OA it creates a new deposit for the person who receives the loan; the banks' excess reserves, the desired reserve ratio, and the currency drain ratio O B. the Fed prints more dollar bills; the speed at which the Fed can increase the quantity of bills in circulation and the desired reserve ratio O C. the Fed creates a new deposit for the bank; the bank's total assets and total liabilities O D. the Fed creates a new deposit for the bank; the amount of excess reserves and the desired reserve ratio O E. it creates a new deposit for the person who receives the loan; the banks total assets and total liabilities