Part 3 - Practice- For each scenario, identify how the action will immediately affect M1, M2, and the monetary base. Indicate if each will increase (Inc), decrease (Dec), or not change (NC). Scenario M1 M2 Monetary base NC 19. Marc transfers $500 from his savings to his checking account NC 20. Cynthia deposits $200 cash into her savings account Joffrey burns a $100 bill to impress a girl (don't do this-it's illegal | and she won't be impressed) 21. NC A bank uses $1,000 of its reserves to make a cash loan 1. 22. A bank sells the Federal Reserve $10,000 worth of treasury 23. bonds. The bank receives $10,000 as excess reserves in exchange for the bonds NC A business transfers $20,000 from a money market account to 24. their checking account NC NC Maria withdraws $250 cash from her checking account out of an 25. ATM machine

Part 3 - Practice- For each scenario, identify how the action will immediately affect M1, M2, and the monetary base. Indicate if each will increase (Inc), decrease (Dec), or not change (NC). Scenario M1 M2 Monetary base NC 19. Marc transfers $500 from his savings to his checking account NC 20. Cynthia deposits $200 cash into her savings account Joffrey burns a $100 bill to impress a girl (don't do this-it's illegal | and she won't be impressed) 21. NC A bank uses $1,000 of its reserves to make a cash loan 1. 22. A bank sells the Federal Reserve $10,000 worth of treasury 23. bonds. The bank receives $10,000 as excess reserves in exchange for the bonds NC A business transfers $20,000 from a money market account to 24. their checking account NC NC Maria withdraws $250 cash from her checking account out of an 25. ATM machine

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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Similar questions

John Antonio transfers $5000 from his checking account to his savings account. How are M1 and M2 affected by this decision? a.M1 increases and M2 decreases b.M1 and M2 remain the same c.M1 decreases and M1 increases d.M1 increases and M2 increases e.M1 decreases and M2 decreases
According to table below (all figures are in billions of dollars)Currency held outside banks $ 800Demand Deposits 1000Traveler's Checks 100Other checkable deposits 200Savings accounts 300Money market accounts 100Other near monies 200a) What is the value of M1?b) What is the value of M2 ?
What does m1,m2 m3 include in detail ??
why does m2 fall and not remain unchanged? doesn't M2 consist of both M1 and M2? so when M1 rise (due to more cash), savings account (which is under M2) will drop by the same amount as M1 rise, hence overall M2 will remain unchanged?
Suppose you transfer $2,000 from your mutual fund account to your checking account. What is the immediate impact of this transfer on M1 and M2?
13. Which usually grows faster: M1 or M2? Produce a graph showing M2 divided byM1. When this ratio rises, M2 outpaces M1 and vice versa. What is the long-runpattern? Is the pattern stable?
Suppose that National bank has $36 million in checkable deposits, Commonwealth bank has $45 million in checkable deposits and the required reserve ratio for checkable deposits is 10%. If the National bank has $4 million in reserves and Commonwealth has $5 million iin reserves, how much excess reserves does each bank have? Suppose that a customer of the National bank writies a check for $2 million to a real estate broker who deposits the check at Commonwealth bank. After the check clears, how much excess reserves does each bank have?
Assuming initially that rr=10%, c=40%, and e=0, what would happen to the M1 money multiplier if there was an increase in rr to 15%.
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Calculate M1 and M2 based on given information below
Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserve ratio is 10%. Paolo, a client of First Main Street Bank, deposits $500,000 into his checking account at First Main Street Bank. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans). Assets Liabilities Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 10%. Hint: If the change is negative, be sure to enter the value as negative number. Amount Deposited Change in Excess Reserves Change in Required Reserves (Dollars) (Dollars) (Dollars) 500,000 Now, suppose First Main Street Bank loans out all of its new excess reserves to Lucia, who immediately uses the funds to write a check to Kenji. Kenji deposits the funds immediately into…
Which of the Federal Reserve’s measures of the monetary aggregates—M1 or M2—is composed of the mostliquid assets? Which is the larger measure?