Calculate the currency-deposit ratio

Reference no: EM13174771

Suppose that currency in circulation is $600B, demand deposits are $900B, and excess reserves are $15B. The required reserve ratio is 10%.

a. Calculate the money supply, the currency-deposit ratio, the excess reserve ratio, and the money multiplier.

b. Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1,400B due to a sharp contraction in the economy. Assume the ratios you calculated in part (a) remain unchanged, what do you predict will be the effect on the money supply.

c. Suppose the central bank conducts the same open market purchase as in part (b), except that banks choose to hold all of these proceeds as excess reserves rather than loan them out, due to fear of a financial crisis. Assuming that currency and deposits remain the same, what happens to the amount of excess reserves, the excess reserve ratio, the money supply, and the money multiplier?

Reference no: EM13174771

Questions Cloud

Discuss the problems of estimating overhead cost : Discuss key assumptions and limitations of the regression models which you considered and Discuss the problems of estimating overhead cost at the following projected activity level

Write a molecular equation total ionic equation : write a molecular equation total ionic equation and net ionic equation for this precipitation reaction between the given ionic compounds Ba(no3)2 and NiSO4.

What is the minimum number of moles of sodium carbonate : If 50.0g of sulfuric acid is spilled, what is the minimum number of moles of sodium carbonate that have to be added to it to complete this reaction?

Budget is fluid and dynamic document : A budget is a fluid and dynamic document. After all, how can you project for the unprojectable? Can you think of any instances where a budget may shift over the course of its use?

Calculate the currency-deposit ratio : Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $1,400B due to a sharp contraction in the economy. Assume the ratios you calculated in part (a) remain unchanged, what do you predict will be the e..

Library or internet-employee acceptable use policy : You will conduct research (library or internet), write an Employee Acceptable Use Policy, and produce a justification report.

Calculate the profit maximizing output : )Determine the range of prices for which the firm earns a profit. 3) Calculate the profit maximizing output and the resulting profit when price is $101.

State what is the molecular mass of the protein : The osomotic pressure of this solution was 10.68 torr at 25 degrees C. What is the molecular mass of the protein?

Interviewing for psychologist position : You are interviewing for a psychologist position with a top company. After your face-to-face interview with the team, they have provided you with two additional assignments-Part A and Part B below, which will complete the interview process.

User Account

All Pages