For the last time, consider an economy described by the following information:Demand deposits total $200,000Cash in bank vaults totals $50,000• The public holds cash of $36,000US government bonds held by banks total $6,000Banks' deposits in the Fed total $22,000Let's say that one bank in the economy has $60 in excess reserves and that there are enough banksin tesal for the full multiplied money creation process to take place. Calculate the amount (the actualamount, not the maximum) that the entire banking system -- all banks working together -- will createin new money, using these ER as your starting point. Carefully follow all numeric directions,including those related to rounding.

To calculate the actual amount: Money multiplier = 1/Reserve ratio To get the reserve…

For the last time, consider an economy described by the following information: Demand deposits total $200,000 • Cash in bank vaults totals $50,000 The public holds cash of $36,000 US government bonds held by banks total $6,000 Banks' deposits in the Fed total $22,000 Let's say that one bank in the economy has $60 in excess reserves and that there are enough banks in tosal for the full multiplied money creation process to take place. Calculate the amount (the actual amount, not the maximum) that the entire banking system -- all banks working together -- will create in new money, using these ER as your starting point. Carefully follow all numeric directions, including those related to rounding.

For the last time, consider an economy described by the following information: Demand deposits total $200,000 • Cash in bank vaults totals $50,000 The public holds cash of $36,000 US government bonds held by banks total $6,000 Banks' deposits in the Fed total $22,000 Let's say that one bank in the economy has $60 in excess reserves and that there are enough banks in tosal for the full multiplied money creation process to take place. Calculate the amount (the actual amount, not the maximum) that the entire banking system -- all banks working together -- will create in new money, using these ER as your starting point. Carefully follow all numeric directions, including those related to rounding.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter27: Money And Banking

Section: Chapter Questions

Problem 31P: Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money,...

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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?
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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
If the Fed sells $1 million of bonds and banks reducetheir borrowings from the Fed by $1 million, predictwhat will happen to the money supply
Suppose you win on a scratch-off lottery ticket and you decide to put all of your $2,500 winnings in the bank. The reserve requirement is 10%. What is the maximum possible increase in the money supply as a result of your bank deposit? maximum increase: $ Which events could cause the increase in the money supply to be less than its potential? All money loaned out is deposited back into the banking system. Banks choose to loan out all excess reserves. SEL Some loan recipients choose to hold some cash instead of depositing all of it in banks. Banks decide to keep some excess reserves on hand. C Z MODE PAYLA I topm PEDRULESTAN SVETE D P Activate Windows Salto Settings to activate Windows
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When a bank grants a loan, the money supply M₁ will increase, even if the funds from the loan are not spent. O True O False
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Some individuals have suggested raising the required reserve ratio for banks to 100 percent in a limited reserve banking system. a. What would the money multiplier be if this change was made? Assume people hold no cash. Instructions: Enter your response as a whole number. b. What effect would such a change have on the money supply? The money supply would decrease c. How could that effect be offset? By a decrease in government spending By an increase in government spending By an increase in taxes
Suppose the Federal Reserve sets the reserve requirement at 10 percent, banks hold no excess reserves, and no additional currency is held. Instructions: Enter your answers as whole numbers. Include any negative signs if necessary. a. What is the money multiplier? b. By how much will the total money supply change if the Federal Reserve changes the amount of reserves by -50 million? million c. Suppose the Federal Reserve wants to decrease the total money supply by $600 million. By how much should the Federal Reserve change reserves to achieve this goal? million