EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 33, Problem 4DQ
To determine
The commercial banks and federal reserve banks.
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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
10
If 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 $3,366,667
0
Question 16
Suppose the following:
• Smokey Bank has total deposits of $600,000.
In addition, it currently has outstanding loans in the amount of $400,000
Finally, the required reserve ratio is 15%.
.
.
What is the money multiplier?
O 0.90
0.10
090
15
O 6.67
Chapter 33 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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- 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 millionarrow_forwardTable 29-4 Reserves Loans 6.0 6.4 15.6 Assets O 16.7 Bank of Pleasantville Refer to Table 29-4. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier? $3,000 Deposits 47,000 Liabilities $50,000arrow_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_forwardUsing 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 255arrow_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
- 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_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_forwardTable 29-6. Reserves Loans O $106,000 O $60,000 O $72,000 Assets O $50,200 Bank of Springfield $19,200 228,000 Refer to Table 29-6. Assume the Fed's reserve requirement is 6 percent and that the Bank of Springfield makes new loans so as to make its new reserve ratio 6 percent. From then on, no bank holds any excess reserves. Assume also that people hold only deposits and no currency. Then by what amount does the economy's money supply increase? Deposits Liabilities $240,000arrow_forward
- 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 MDarrow_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_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
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