jackson busn5620 week7 personal assignment 1 1 Essay

922 Words May 13th, 2015 4 Pages
BUSN 5260
Current Economic Analysis
Week 7: Personal Assignment
There are Internet questions with this assignment at the end.

Problems
Problem 1
You have just inherited $100,000 from your rich uncle Sam. Being the conservative sort, you rush to your local bank and deposit the entire windfall. The reserve requirement is currently 10 percent. What is the immediate impact on the balance sheet of the bank?
Reserve Account = 10% * 100,000 = $ 10,000
Cash Account = $ 100,000- $10,000 = $ 90,000
Liability account = $ 100,000

Mention each account affected and the appropriate amount. The Reserve account of the company is increased by $ 10,000; cash account of the bank is increase by $ 90,000, while the liability of $
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It stimulates and increases trade by providing an easy method of exchange. Since Walnuts are small and portable, walnuts will be an effective medium of exchange.
Store of Value-- Means that walnuts has the ability to hold value over time. This makes walnuts a useful mechanism for transforming income in the present into future purchases.
Standard of Value-- This function of walnuts provides a common measurement of the relative value of goods and services. Without walnuts how would governments collect taxes?

Problem 4
Under what circumstances might the Fed want to shrink (contract) the money supply? Be sure to relate your answer to the resulting effect on the Aggregate Demand/Aggregate Supply model.
The main reason why the Fed wants to shrink the money supply is to achieve their policy goals. They simply want to alter the money supply. This is achieved through raising the federal discount rate, reducing the monetary base through open market operations, and increasing reserve requirements. The Fed is likely to decrease the money supply during times of high output and high inflation. The reason is that this gives the Fed opportunity to keep inflation in check without doing much harm to output.

Problem 5
Assuming the Fed chooses to shrink the money supply, explain how each of the three tools would be used. If the fed chooses to shrink the money supply

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