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 9DQ
To determine
Money multiplier.
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Students have asked these similar questions
Suppose that a small country currently has $4 million of currency in circulation, $6 million of checkable deposits, $200 million of
savings deposits, $40 million of small-denominated time deposits, and $30 million of money market mutual fund deposits.
From these numbers we see that this small country's MI money supply is
, while its M2 money supply is
O $250 million; $270 million
$210 million; $280 million
$10 million; $270 million
$10 million; $280 million
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, the Federal Reserve Bank desires to increase the size of checkable deposits
by $50,500. If the required reserve ratio is 5%, then the Fed needs to purchase
worth of securities in the open market.
O $2,445
O $2,650
O $2,525
O $2,500
Chapter 15 Solutions
Macroeconomics: Principles, Problems, & Policies
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Similar questions
- Suppose 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_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_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
- 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 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_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
- Suppose a customer makes a $2,280 cash withdrawal from Bank A. If the reserve requirement was total decrease in the money supply in the 6 percent, the deposit would ultimately lead to a economy, if all banks in the system lend out 100 percent of their excess reserves. O $2,143.20 O $2,280 O $28,500 O $35,720 $38,000arrow_forwardItem 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 $2,600arrow_forwardPeople 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_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_forward4-2 Module Four Homework LO 5 166 PIE To use money growth as a short-term monetary policy instrument, a central bank must belleve that Multiple Choice Saved there is a stable link between the monetary base and the rate of inflation only money matters there is an unpredictable relationship between money aggregates and inflation the deposit expansion multiplier is volatile and unpredictablearrow_forwardIf Bank A has $3.8 million in total deposits, $860,000 in total reserves, and faces a 12 percent reserve requirement, the amount of money that Bank A could initially create by loaning out their excess reserves is: O $100,000. O $385,000 $404,000 O $756,800 O $3,366,667arrow_forward
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