Calculate the percentage change in equilibrium level, Financial Accounting

Consider a hypothetical banking system in which banks produce only demand deposit accounts. The currency deposit ratio (c) is 30% and the customary cash reserve ratio (r) for demand deposits is 10%. The money supply in existence is $1750 million.

(i) Calculate the percentage change in the equilibrium level of the money supply after the central bank decreases the monetary base by $250 million through its sale of Government of Canada treasury bills in the money market;

(ii) Calculate the amount of bank reserves held against demand deposits;

(iii) Calculate the new level of the money supply after the central bank's open market sale of the government securities;

(iv) Calculate the percentage change in the money supply if the cash reserve ratio were instead reduced to 6%. Explain your results and illustrate your answers in both cases with the appropriate diagrams.

Posted Date: 2/18/2013 7:23:51 AM | Location : United States







Related Discussions:- Calculate the percentage change in equilibrium level, Assignment Help, Ask Question on Calculate the percentage change in equilibrium level, Get Answer, Expert's Help, Calculate the percentage change in equilibrium level Discussions

Write discussion on Calculate the percentage change in equilibrium level
Your posts are moderated
Related Questions
How to Determine the financial reports of businesses In response to criticisms that financial reports of some businesses aren't clear enough to users, accounting rule makers ha

Alexandria Co. Ltd has an authorized capital of Rs 25,000,000 divided into 250,000 equity shares of Rs 100 each. 100,000 shares were issued to public and Rs 80 per share were paid.

Mr N. M. is lucky to have a lottery prize of Rs 20 million. He does not have any liability and does not have any claimant over this money. He has the following alternatives: (i)

EXPLIN THE PROCEDURE FOLLOWED IN GOVERMENT SYSTEM OF ACCOUNTING IN INDIA.


This assignment requires you to pretend you have $10,000 to invest for 4 weeks.  You are to "invest" this money in stocks or mutual funds and to track your investments on a weekly

Prepare a year trading cash budget: Gary Hart needs to calculate how much working capital he will need in his first year as a restaurateur. An accountant friend recommends he

Petition by creditor Any creditor including an assignee of a debt, may petition, provided: The debt due to him amounts to at least Shs 1,000; The debt is certain and i

Alta Velocidad Esperanza de L'Argentina, Sociedad Anónima (AVE), a high-speed railway operator domiciled in Rio Norte, Argentina, is a Foreign Private Issuer as defined by the U.S.

Jim owns and manages a small business, which provides an office design service, as well as buying and selling office furniture. Jim is a sole trader who manages all aspects of the