1.4 Suppose you transfer $4,000 from your money market mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2? 1.5 Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason? 1.6 Suppose that the required reserve ratio is 2 percent, and you deposit $100,000 of currency into Chase Bank. What is the potential increase in deposits in the banking system brought about by your deposit? What is the potential change in the money supply?

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter14: Banking And The Money Supply
Section: Chapter Questions
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1.4 Suppose you transfer $4,000 from your money market mutual fund account to your
checking account. What is the immediate impact of this transfer on M1 and M2?
1.5 Why do banks create money? Do they create money to help the Federal Reserve control
the money supply or is there a more basic reason?
1.6 Suppose that the required reserve ratio is 2 percent, and you deposit $100,000 of currency
into Chase Bank. What is the potential increase in deposits in the banking system brought about
by your deposit? What is the potential change in the money supply?
Transcribed Image Text:1.4 Suppose you transfer $4,000 from your money market mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2? 1.5 Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason? 1.6 Suppose that the required reserve ratio is 2 percent, and you deposit $100,000 of currency into Chase Bank. What is the potential increase in deposits in the banking system brought about by your deposit? What is the potential change in the money supply?
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