) The ________ the costs associated with deposit outflows are, the ________ excess reserves banks will want to hold. A) lower; more B) higher; less C) higher; more D) none of the above, since deposit outflows cannot be anticipated
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18) The ________ the costs associated with deposit outflows are, the ________
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- The major protection against a sudden massattempt to withdraw cash from banks is thea. Federal Reserve.b. Consumer Protection Act.c. deposit insurance provided by the FDIC.d. gold and silver backing the dollar.Suppose the Fed buys $2000000 in government securities from someone who is a depositor at the First National Bank of El Reno. Lets assume the person deposits this money in this bank. Further assume that the current reserve requirement ratio is 20%. Please indicate below what will initially happen to this bank's balance sheet as a result of this transaction. Change in Reserves Change in loans Change in deposits Please indicate what will eventually happen to the nation's banking system as a result of this transaction. Change in reserves Change in loans Change in DepositsQUESTION 1 Which actions by banks ensure that reserves are adequate to cover deposit outflows? A. Customer relations managment B. Asset management C. Liquidity management D. Liability management
- A friend of yours produces 7,000 counterfeit one-dollar bills. Assume that the bills are undetectable with current technology and that the required reserve ratio is 20%. (a) What would be the maximum increase in the money supply? (b) Give two reasons as to why the actual increase in the money supply may be smaller than your answer to (a).Assume excess reserves = R2 million; the excess ratio : required reserves = 2:1; Calculate the total reserves; reserve requirement, and total deposits. A) R1mil, 10%, R10mil B) R1mil, 10%, R5mil C) R3mil, 5%, R20mil D) R3mil, 5%, R10milWhich bond should have the highest interest rate? A. Low quality bonds B. Medium quality bonds C. High quality bonds Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Common stocks are not securities C. Stock prices tend to be very volatile D. Higher stock prices allow companies access to more capital What is the expected impact of a decline in the money supply to the US economy? A. Lower aggregate prices (deflation) B. Higher aggregate prices (inflation) C. There is no general relationship between the money supply and inflaton Which of the following is NOT a component of federal fiscal policy? A. Federal tax revenues B. Federal government expenditures C. Federal budget deficit D. All of the above are components of federal fiscal policy A strong US dollar tends to A. Reduce exports to foreign…
- Question 5 Consider the model of supply and demand for central bank money. Assume that there are commercial banks. Suppose that people hold 20% of their money in currency and 80% of their money in deposits. The central bank sets the reserve-to-deposit ratio at 10%. In the first period, the central bank increases the supply of money by $200, buying bonds through Open-Market Operations. Use this information to answer the following questions: (a) For the second period (after the central bank has injected $200 in the economy), calculate (please show workings) (i) the demand for currency, (ii) the amount of deposit held at the commercial banks, (iii) the demand for reserves held at the central bank, and (iv) the demand for the high-powered money. How much is the additional money supply created at the end of the second period? (b) How much is the additional money supply created at the end of the third period? (c) As time continues, additional money supply will be created. Calculate the total…A commercial bank named First Lender initially holds the required amount of reserves at the Fed. Imagine that the Fed conducts an open-market operation and buys $30,000 of bonds from First Lender. Assume that the reserve requirement is 25%. What is the maximum possible amount that the national money supply could increase as a result of the open-market operation? $120,000 $240,000 $60,000 $22,5001. Suppose velocity is 3, real output is 9000, and the price level is 1.5. What is the level of real money balances in this economy? 2. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of reserves in this economy? 3. Considered the following data for an economy. Currency in circulation held by the public: CU = 400 dollars; Monetary Base: B = 800 dollars; currency/deposit ratio: cu = 0.25. What is the value of the money multiplier in this economy? Please answer the three questions above (and highlight the answer if you can). Please explain the math/reasoning used
- Suppose that the reserve ratio is given by: re = 0.4 2r, where r is the interest rate. Thecurrency-deposit ratio (cu) is 0.4 and the monetary base (H) is 60. The money demand(L) is given by:L = 0.5Y 10rQ)Suppose that the money multiplier is originally equal to 3. However, due to lack of confidence in private banks, the money multiplier is reduced to 1.9. How much does the monetary base need to increase (in percentage terms) in order to keep the money supply constant?nThe Federal Reserve has decided it wants to increase interest rates by decreasing the money supply through deposits held at financial intermediaries. All else equal, if the reserve requirement is 10% for all deposits, and the Fed wants to decrease deposits by $100 million, which of the following actions should be taken? Assume no excess reserves exist in the banking system.a. Buy government securities from dealers totaling $1 billion.b. Sell government securities to dealers totaling $111 million.c. Buy government securities from dealers totaling $11.1 million.d. Sell government securities to dealers totaling $11.1 million.e. None of the above.