Authority to pay interest, Management Theories

In this problem, we are going to measure the money multiplier one year prior to the Great Recession (12/2006) and compare it to the money multiplier 5 years since (12/2011).  The implication, as you may have guessed, is that hence the Fed has been paying interest on excess reserves (10/2008), the excess reserve to deposit ratio has risen which implies a lower money multiplier.   

Data you require for problem 1:

Monetary Base    Dec 2006: 837.701 ;  Dec 2011: 2603.487

Excess Reserves  Dec 2006: 1.863  ;  Dec 2011: 1502.206

Currency   Dec 2006: 749.6  ;  Dec 2011: 1001.5

Required Reserves   Dec 2006: 41.419 ;  Dec 2011: 96.510

Demand Deposits   Dec 2006: 609.9  ;  Dec 2011: 1154.6

a) Measure the money multiplier for Dec 2006, one year prior to the Great Recession. Please conclude all work.

b) Measure the money multiplier for Dec 2011, 5 years hence and a little more than 3 years after the Fed got the authority to pay interest on excess reserves. See the Federal Reserve's press release.

Posted Date: 3/20/2013 6:24:07 AM | Location : United States

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