Morgan D. decides to go on a vacation for which he withdraws $2,500 from his savings account (NOT his checking account. Recall, saving accounts are part of M2 and M1 is a part of M2). As a result of this transfer by itself O M1 increases by $2,500 and M2 stays the same. O M1 decreases by $2,500 and M2 decreases by $2,500. O M1 decreases by $2,500 and M2 stays the same. O M1 increases by $2,500 and M2 decreases by $2,500.

Morgan D. decides to go on a vacation for which he withdraws $2,500 from his savings account (NOT his checking account. Recall, saving accounts are part of M2 and M1 is a part of M2). As a result of this transfer by itself O M1 increases by $2,500 and M2 stays the same. O M1 decreases by $2,500 and M2 decreases by $2,500. O M1 decreases by $2,500 and M2 stays the same. O M1 increases by $2,500 and M2 decreases by $2,500.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter25: Money, Banking, And The Federal Reserve System

Section: Chapter Questions

Problem 13P

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What is meant by "demand deposits"? O a) Bank accounts where you can't withdraw money by writing a check, but can withdraw the money at a bank-or can transfer it easily to a checking account. O b) An institution that operates between a saver with financial assets to invest and an entity who will receive those assets and pay a rate of return. c) Deposits in banks that are available by making a cash withdrawal or writing a check. C PRECEDENS 22 d) A bank's liabilities can be withdrawn in the short term while its assets are repaid in the long term.
The difference between M1 and M2 is given bywhich of the following?a. M1 includes currency, coins, gold, and silver,whereas M2 does not contain gold and silver.b. M1 is made up of currency and checkabledeposits, whereas M2 contains M1 plus savingsdeposits and small time deposits.c. M1 is limited to checkable deposits, whereasM2 contains currency.d. M1 includes only currency, whereas M2contains M1 plus checkable deposits.
Suppose that the bank holds $15m of treasury bonds, $10m of reserves, $30m of checkable deposits, $20m of time deposits and has $6m of capital. How much loan does the bank have if we know it doesn't have any other assets or liabilities not listed here? Suppose that checkable deposits and reservers pay 0 interest The interest rate on treasuries is 3% Loans pay 7% and time deposits pay 5% How much profits does the bank make? What is the bank's return on assets?
. 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?
Suppose that the bank holds $15m of treasury bonds, $10m of reserves, $30m of checkable deposits, $20 of time deposits and has $6m of capital. How much loan does the bank have if we know it doesn't have any other assets or liabilities Suppose in the same bank checkable deposits and reserves pay 0 interest. The interest rate on treasuries is 3%, loans pay 7% and time deposits pay 5%. How much profit does the bank make? What is the banks return on assets?
Assume that the balance sheet of a bank in your assigned country as below:Assets LiabilitiesReserves $5,000 Deposits $40,000Loans $45,000 Capital $10,000a. If the required reserve ratio is 3 percent, then how much does this bank has excessreserves?b. Suppose a bank purchases $1,500 of government securities using funds from reserves.How much do bank assets change as a result of this transaction? Show the change inthe balance sheet above. How much does Money Supply change due to this transaction?c. Calculate the bank’s leverage ratio. What is the maximum decrease (in %) in the marketvalue of assets before the bank becomes insolvent?
4. a) Suppose that Tk.10,000 in new taka bills (never seen before) falls magically from the sky into your hands. What are the minimum increase and the maximum increase in the money supply that may result? Assume the required reserve ratio is 10 percent.b) Suppose you receive Tk. 10,000 from your grandmother and deposits the money in a saving account. your grandmother gave you the money by writing a check on her saving account. Would the maximum increase in the money supply still be what you found it to be in part a) where you received the money from the sky? Why or why not?c) Suppose that instead you getting Tk. 10,000 from the sky or a check through your grandmother, you get the money from your mother who had buried it in a can in her backyard. In this case, would the maximum increase in the money supply be what you found it to be in part a)? Why or why not?
1) In the IS equation why wasnt G in the calculations. 2)Suppose that with all exogenous variables, including T and M at their original values, households become less confident about the future and reduce their autonomous level of consumption from 200 to 150. Solve for the new values of e, Y and NX. With the help of graphs, explain very carefully the mechanisms by which a new equilibrium is reached. 3)Suppose that with all exogenous variables at their original values, the autonomous part of money demand increases to 70. Solve for the new values of e, Y and NX. With the help of graphs, explain very carefully the mechanisms by which a new equilibrium is reached.
II. Concentrate on any valid definition of money to answer the following scenarios logically; a. If you have 20 notes of prize bonds, each has the worth of Rs. 1500/- , can we term these prize bonds as money? If YES then how, and if NO then why? If you regularly purchase Pepsi for that you pay Rs. 100 per bottle. After taking the drink out of that, if you have 50 empty bottles at your home now, can we term these bottles as money as because you have spent money for these too? If yes then how and if no then why? c. If you have the currency note of Rs. 5 in your pocket which was used in the past. Can we say that this is money today too? If yes then how and if no then why?
Suppose that the bank holds $15m of treasury bonds, $10m of reserves, $30m of checkable deposits, $20 of time deposits and has $6m of capital. How much loan does the bank have if we know it doesn't have any other assets or liabilities Suppose in the same bank checkable deposits and reserves pay 0 interest. The interest rate on treasuries is 3%, loans pay 7% and time deposits pay 5%. How much profit does the bank make?
Consider a situation where the central bank increases the money supply. equal, if nominal GDP increased by $800 billion during a time when veloc did the central bank increase the money supply? O $400 million O $200 million O $200 billion O $400 billion No new data to save. Last check
7. As the interest rate ________, the opportunity cost of holding money ________ and individuals chooseto hold________ money. A increases, increases, moreB decreases, decreases, moreC increases, decreases, lessD decreases, increases, more