The reserve requirement is 10%. Suppose that the Fed sells $100,000 worth of U.S. government securities from a bond dealer, electronically debiting the dealer's deposit account at Reliable Bank. Which of the following correctly describes the immediate effect of this transaction on the money supply? O A. The money supply decreases by $1,000,000. O B. The money supply decreases by $100,000. OC. The money supply decreases by $90.000. OD. There is no change in the money supply. OE. None of the above.

The reserve requirement is 10%. Suppose that the Fed sells $100,000 worth of U.S. government securities from a bond dealer, electronically debiting the dealer's deposit account at Reliable Bank. Which of the following correctly describes the immediate effect of this transaction on the money supply? O A. The money supply decreases by $1,000,000. O B. The money supply decreases by $100,000. OC. The money supply decreases by $90.000. OD. There is no change in the money supply. OE. None of the above.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Money Growth And Inflation

Section: Chapter Questions

Problem 1PA

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(A). For the Fed to reduce the money supply using open market operations it should ... O a. Increase the money supply. O b. Lower the minimum reserve requirement. O c. Buy treasury bills from banks. O d. Sell treasury bills to banks. (b). Which of the following is not a result of expansionary Open Market Operations? O a. Increase in the money supply. O b. Less investment spending. O c. Banks make more loans. O d. Decrease in the federal funds rate.
ls help with this Suppose that the Central Bank has currently set the reserve requirements in the economy to be equal to 10%. Assume that there is no cash drain. Suppose also that in this economy there are $400 in initial deposits and $6,000 of cash. 6. Given the above, what is the total Money Supply (MS) in the economy?Now suppose that the economy’s demand for money (MD) is given by the following equation: MD=12,000−1,000rWhere r is the interest rate in integers (e.g. at a 2% interest rate, r = 2). 7. What is the equilibrium quantity of money (M) and interest rate (r) in this economy? Now suppose that the Central Bank wants to close an output gap in the economy, and wants to raise the interest rate by 2% to do this. Assume that the Central Bank targets the Money Supply directly. 8) If the Central Bank wants to change the Money Supply by changing the quantity of cash in the market in order to achieve this interest rate increase, how much does it need to change the quantity of cash? […
3. Suppose that this year’s money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion.a. What is the price level? What is the velocity of money?b. Suppose that velocity is constant and the economy’s output of goods and services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant.c. What money supply should the Fed set next year if it wants to keep the price level stable?
Pls help with this Suppose that the Central Bank has currently set the reserve requirements in the economy to be equal to 10%. Assume that there is no cash drain. Suppose also that in this economy there are $400 in initial deposits and $6,000 of cash. 6. Given the above, what is the total Money Supply (MS) in the economy?Now suppose that the economy’s demand for money (MD) is given by the following equation: ??=12,000−1,000∗rWhere r is the interest rate in integers (e.g. at a 2% interest rate, r = 2). 7. What is the equilibrium quantity of money (M) and interest rate (r) in this economy? Now suppose that the Central Bank wants to close an output gap in the economy, and wants to raise the interest rate by 2% to do this. Assume that the Central Bank targets the Money Supply directly. 8) If the Central Bank wants to change the Money Supply by changing the quantity of cash in the market in order to achieve this interest rate increase, how much does it need to change the quantity of cash?…
13. Suppose that the T-account for Nan Bank Inc. is as follows:Assets LiabilitiesReserves $100,000Loans $400,000 Deposits $500,000If the Bank of Canada requires banks to hold 5 percent of deposits asreserves, 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?
5. Suppose that this year’s money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. A.) What is the price level? What is the velocity of money? B.) Suppose that velocity is constant, and the economy’s output of goods and services rises by 5% each year. C.) What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? D.) What money supply should the Fed set next year if it wants to keep the price level stable? E.) What money supply should the Fed set next year if it wants an inflation rate of 10%.
2 Which of the following will increase the amount of moeny one wishes to hold? a) an increase in the interest rate increase b) a reduction in the interest rate increase c) a reduction in income d) none of the above 1.5 At the current interest rate, suppose the supply of money is less than the demand for money. Given this information, we know that: a) the price of bonds will tend increase. b) the price of bonds will tend to fall. c) production equals demand. d) the goods market is in equilibrium.