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Suppose that the Fed purchases from bank A some bonds in the open market and that, before the sale of bonds, bank A had no excess reserves.
a) Describe what initially happens to the reserves of bank A.
b) If bank A does not want to hold excess reserves, what will it do with the additional money received from the sale of bonds to the Fed?
c) Why do we expect, at least in usual times, that the amount of checking deposits in the economy will go up?
d) Now suppose that the minimum required reserve ratio for banks is 1/10. Also suppose that banks hold no excess reserves and that currency in circulation is unchanged from the purchase of bonds. If the Fed buys $20 billions of bonds from bank A, what will be the increase in checking deposits?
Vasco likes spare ribs, R, and fried chicken, C. His utility function is: U(C, R) = 40R^2C. His weekly income is $180, which he spends on only ribs and chicken. If he spends $20 for a slab of ribs and $10 for a chicken, what is his optimal consumptio..
A local church parish wants to raise money to add to their campus. In a sample from a previous fund raising campaign, the parish found that of the 136 people in the sample they contacted, that 67 actually contributed money. When testing (at the 5% le..
The Solow model focus on how resources affect output. This module/week, you focused on capital. Name the other two major categories of resources. Draw an aggregate production function with a typical shape; label this function F.
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You are attempting to construct an optimal portfolio consisting of T-bills and a risky portfolio. The expected return on the risky portfolio is 19% and the standard deviation is 25%. The T-bill rate is 5.3%. (a) If you put 45% of your funds in T-bill..
Briefly describe the Malthusian population model and explain why it is inconsistent with population data after 1750. Using a Lee-Malthus diagram(s), derive the Iron Law of Wages result. Be sure to label the curves, axis, and important points in the d..
What is the present worth of a series of equal payments of $5000 made every two years for the following time frames? The nominal interest rate is 8%. For a period of 40 years? In perpetuity?
The government spends 13,00 billion on goods and services (a= 1300 )and levies on income tax equal to 20 y.the consumption function is c=300 +0.75di,where di is disposable income investment (i)is I =900and net exports are 100.Find the equilibrium gdp..
Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2. (recall the Lerner index) 1. If the firm's marginal cost is constant at $2, what is the profic-maximizing price and quantity? 2. If the firm's marginal cos..
Assume you have decided to enrol in a bartending academy and while taking classes you have learned that even though customers order a rum and coke they can never tell the difference if you instead use Pepsi. You have also learned that when people ord..
Conclude by choosing a position for or against ethnicity-based jury nullification and defend your decision.
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