Question 25 Calculate the total change in aggregate spending if investment increases by $200 billion and the marginal propensity to consume is 0.8. Instructions: Give the answer in billions There is no margin for error in this question. Whole numbers only. Question 26 Calculate the Money Multiplier, given the following information. rrr = .09 Total Deposits: $6300 Total Reserves: $4200 Instructions: Calculate the answer to two decimal points The margin of error .1

Question 25 Calculate the total change in aggregate spending if investment increases by $200 billion and the marginal propensity to consume is 0.8. Instructions: Give the answer in billions There is no margin for error in this question. Whole numbers only. Question 26 Calculate the Money Multiplier, given the following information. rrr = .09 Total Deposits: $6300 Total Reserves: $4200 Instructions: Calculate the answer to two decimal points The margin of error .1

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter12: Money And Banking

Section: Chapter Questions

Problem 13E

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How is the amount of reserves banks hold related to the amount of money the banking system creates? Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? Use Microsoft equation tool where needed to show all equations or notations. How much additional new demand deposits could the $3,000 deposit support?
Money demand curve is downward sloping because as interest rate rises, businesses find it less attractive to borrow for the sake of investment. as interest rate rises, liquidity provided by holding money looses itsattractiveness for households, compared to other financial instruments as means of saving. as interest rate rises, it becomes less attractive for households to hold other financial instruments as means of saving as interest rate rises, households will need less money for their daily transactions.
. Assume that the banking system has total reservesof $100 billion. Assume also that required reservesare 10 percent of checking deposits and that bankshold no excess reserves and households hold nocurrency.a. What is the money multiplier? What is the moneysupply?b. If the Fed now raises required reserves to20 percent of deposits, what are the change inreserves and the change in the money supply
A rise in rr raises the money multiplier. O True O False
Assume that Lucky Bank is required to hold a 10% deposits as reserves, and there is a $3000 increase in demand deposits. Calculate the money multiplier? Use Microsoft equation tool where needed to show all equations or notations. How much additional new demand deposits could the $3,000 deposit support?
The economy is also characterised by the following features;Total deposits = $250,000,Total currency in circulation = $45,000; andTotal reserves = $25,000.Given the information above, calculate the money multiplier and hence the changein the money supply if total reserves increase by 10%.
Suppose that banks are required to hold reserves equal to at least 4 per cent of their deposits and hold no excess reserves. Also suppose that desired holdings of currency by the non-bank public are 3 per cent of deposits. The total money supply is $450m. From this information calculate the following. (Note: enter numerical values only. No words or symbols) The simple deposit multiplier (to one decimal place) The money multiplier (to one decimal place) The monetary base ($m to one decimal place) $
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the (economy-wide) currency ratio, carefully following all numeric instructions. Do not convert the ratio into percent. In other words, if you get k of 0.99, enter only 0.99 in the blank.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the "real-world multiplier," carefully following all numeric instructions.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate the amount of cash in Bank A, carefully following all numeric instructions.
Bank A:Reserves on hand $38,000Deposit in the Fed $30,000US government bonds $12,000Checking account balances $120,000Savings account balances $25,000Bank B:Reserves on hand $50,000US government bonds $7500Savings account balances $20,000Checking account balances $100,000 In addition, people in this economy hold $8800 in cash, and all banks have the same reserve requirements we've used all semester. Calculate this economy's monetary base, carefully following all numeric instructions.
Assume the Federal Reserve has a federal funds rate target (ffr*) at 1.5%. If there is anunexpected decrease in the demand for reserves and the Federal Reserve wants to maintainthe target rate, how does it affect the money supply? Explain with the aid of a supply anddemand for reserves diagram.