Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 15, Problem 5DQ
To determine
Money circulation.
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Figure 30-3
On the following graph, MS represents the money supply and MD represents money demand.
O 2.0.
O 14.3.
O 2.9.
VALUE OF MONEY
O 0.35.
0.35
MS,
8000
MS₂
Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS₂; also
suppose the economy's real GDP is 65,000 for the year. If the market for money is in equilibrium,
then the velocity of money is approximately
13000
QUANTITY OF MONEY
MD
Using the simply multiple deposit multiplier model, if the Federal Reserve Bank wants lending to increase by $4,500, and th
required reserve ratio is 5%, how much do they need to increase reserves by?
O 225
O 205
O 270
O 255
Item Dollars
Checkable Deposits
Small Time Deposits
Currency
Money-Market Mutual Funds Held by
Businesses
Savings Deposits and Money-Market
Deposit Accounts
Money-Market Mutual Funds Held by
Individuals
In Billions
$600
$700
$500
$1,200
$2,500
$800
What is the size of the M1 money supply?
O $800
O $1,900
O $1,100
O $2,600
Chapter 15 Solutions
Macroeconomics: Principles, Problems, & Policies
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Similar questions
- People in the economy have 350 billion CZK on current accounts, they have 250 billion CZK on saving accounts, people hold 200 billion CZK in cash, commercial banks hold 100 billion CZK in cash and the central bank holds 50 billion CZK in cash. What is the money stock M1? O 550 billion O 700 billion O 750 billion O 600 billionarrow_forwardNow, suppose the reserve ratio in the banking system changes to 20% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? O $100,000; $1,900,000. O $80,000; $400,000 $90,000; $900,000. O $10,000; $100,000.arrow_forwardSuppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? $70,000; 700,000. O $100,000; $1,900,000. $90,000, $900,000. O $10,000; $100,000.arrow_forward
- Which of the following statements is true about bonds? 1) A bond's dollar price is calculated as a growth rate. 2) The dollar price and interest rate of a bond have a positive relationship. 3) Bonds can never default. 4) The dollar price and interest rate of a bond have an inverse relationship. 5) Bonds are ownership shares in a firm.arrow_forwardSuppose that Cat nation has $125 million in money. There is only one bank in Cat nation and it holds 15% of the deposits as reserves. What is the money multiplier in this economy? O 6.67 20 O 12.67 10arrow_forwardSuppose there is an upswing in the economy with a large demand for finance to invest by the residential and non-residential building sector such that lending by all banks increases by $250 billion. On the assumption the reserve (or liquidity) ratio of banks is 12% this expansion in economic activity will result in an endogenous increase of O $20 billion of reserves and $230 billion of bank deposit money O $34.1 billion of reserves and $284.1 billion of bank deposit money O $20 billion of reserves and $270 billion of bank deposit money O $26.2 billion of reserves and $276.2 billion of bank deposit moneyarrow_forward
- Refer to the table below. Item Dollars In Billions Checkable Deposits $600 Small Time Deposits $700 Currency $500 Money-Market Mutual Funds Held by Businesses $1,200 Savings Deposits and Money-Market Deposit Accounts $2,500 Money-Market Mutual Funds Held by Individuals $800 What is the size of the M1 money supply? O $800 O $2,600 O $1,900 O $1,100arrow_forwardThe money supply is 2,000, of which 500 is currency held by the public. Bank reserves are 150. The reserve-deposit ratio equals: O a. 0.15 O b. 0.1 0.25 O d. 0.3 O e. 0.075arrow_forwardQUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.arrow_forward
- If the money supply is $60 billion, the velocity of money is 7, and real GDP is $240 billion, then the price level equals: 1.75 O 0.57 1.50. O 4 O 1.25arrow_forwardCash: $104.25 billion Checking deposits: $157.4 billion Saving accounts: $270.5 billion Small denomination time deposits: $20.3 billion Bank reserves held at the Fed: $33.0 billion Suppose that in a certain economy, the above are the only forms of money. How much M2 money is there? O a. $565.15 billion O b. $282.15 billion O c. $427.90 billion O d. $303.50 billion O e. $137.25 billion O f. $552.45 billionarrow_forwardSuppose the reserve ratio of a bank is 0.125 and the Fed buys $10 billion worth of government bonds. What is the maximum impact this has on the money supply? O $80 billion O-$15.625 billion $15.625 billion O $125 billionarrow_forward
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