The money supply is 2,000, of which 500 is currency held by the public. Bank reserves are 150. The reserve-deposit ratio equals: a. 0.15 b. 0.1 C. 0.25 d. 0.3 Oe. 0.075
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- §Suppose that the T-account for First National Bank is as follows: Assets Liabilities Reserves: 90.000-TL Deposits: 500.000-TL Loans: 410.000-TL § §If the Central Bank requires banks to hold 10% of deposits as reserves, how much in excess reserves does First National Bank now hold? MM=1/rr MM=1/(10/100) MM=10 40000*10=400000TL §Assume that all other banks hold only the required amount of reserves. If First National decides to reduce its reserves to only the required amount, by how much would the economy’s money supply increases?Activity in money markets increased significantly in the late 1970s and early 1980s because of O regulations that limited what banks could pay for deposits. O rising short-term interest rates. O both A and B of the above. O neither A nor B of the above.The Fed purchases $1 million of U.S. government securities from First Bank. The required reserve ratio is 10 percent, the currency-deposit ratio is 5 percent, and banks loan all excess reserves. The total increase in monetary base is _____ and the total increase in money supply (M1) is _____. O. $1 million; $3 millionO. $3 million; $1 milionO. $1million; $7 millionO. $7 million: $1 million
- Question 1) Explain what will happen to M1 and M2 measures of money supply if an individual moves money from demand deposit account to a small-denomination time deposit. Question 2) Issuing marketable securities is the primary way businesses finance their operations. Trueor false? Explain your answer. If a four-year bond with a $2000 face value has a coupon rate of 2.5%, and the currentmarket interest rate is 4%, what is the market price of the bond? If this bond sold for $1900, is theyield to maturity greater or less than 4%? Why?The T-sheet below is for the Next to Last National Bank, a commercial bank. The required reserve ratio is 20% of deposits. (a) How much are excess reserves for this bank? (b) Suppose that this bank receives a deposit inflow of $20 million. Suppose also that you are certain that no deposit outflow will occur for several years and that the national economy will continue to grow. To maximize profits, what should you do? Show and explain the new T-sheet.Let the reserve requirement be 15 percent for deposits. Assume there are not excess reserves. If the currency demand equals 40 percent of deposits and total reserves equal $60 billion, then an open markey sale of $1.5 billion in government bonds should Reduce the money supply from $160 billion to $156 billion Increase the money supply from $400 billiion to $410 billion Reducce the money supply from $400 billion to $390 bilion Reduce the money supply from $560 billion to $546 billion
- Bank A has $5,000 in reserves, all required to be held. The required reserve ratio is 10 percent. Bank A has checkable deposits of O $500. O $5,000. O $50,000. O $500,000.4. 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?Assume there is no leakage from the banking system and that all commercial banks areloaned up. The required reserve ratio is 20%. If the Central Bank sells 5 million TL worthof government securities to the public, the change in the money supply will bea) -20 million TL.b) -25 million TL.c) 25 million TL.d) 20 million TL.
- The original purpose of the Federal Reserve was to control the money supply. O act as a lender of last resort. O collect the taxes. O sell lottery tickets. 2.5What are the components of the M1 money supply ? what is the largest component ?which of the components of M1is legal tender? why is the face value of a coin greater than it's interinsic value ? what near- monies are included in the M2 money supply ? How does the purchasing power of the dollar relate to the nations's price level?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 ncrease in the money supply be what you found it to be in part a)? Why or why not?
