Rate of the growth of the money supply

Reference no: EM13895869

QUESTION 1

Based on the "multiply" Excel spread sheet posted in assignment four of our Blackboard site please answer the following question:

For a given open market purchase, the higher the reserve requirement the lower will be the increase in deposits.

Assume excess reserves are always loaned.

True
False

QUESTION 2

Based on the "multiply" Excel spread sheet posted in assignment four of our Blackboard site please answer the following question:

For a given open market purchase of $1,000 and a reserve requirement of 5% the increase in bank deposits will be less than $8,100.
Assume excess reserves are always loaned.

True
False

QUESTION 3

Based on the "multiply" Excel spread sheet posted in assignment four of our Blackboard site please answer the following question:

For a given open market purchase of $1,000 and a reserve requirement of 5% the increase in credit will be more than $9,000.
Assume excess reserves are always loaned.

True
False

QUESTION 4

Based on the "multiply" Excel spread sheet posted in assignment please answer the following question:

For a given open market purchase of $1,000 and a reserve requirement of 5% the increase in bank deposits will be more than $4,000 if only 80% of loans are deposited in the banking system.

Assume excess reserves are always loaned.

True
False

QUESTION 5

Based on the "multiply" Excel spread sheet posted in assignment four of our Blackboard site please answer the following question:

For a given open market purchase of $1,000 and a reserve requirement of 2% the increase in bank deposits will be more than $4,000 if only 80% of loans are deposited in the banking system.

Assume excess reserves are always loaned.

True
False

QUESTION 6

Assume that the market for money clears, that is the quantity of money supplied equals the quantity of money demanded.

Based on the following identity, M x V = P x Y, please answer the following question:
M = Stock of money.
V= the velocity of the money supply
P = the aggregate price Index or price level
Y = the real output of the economy

A periodic increase in the money supply when real output and money velocity are not changing would be inflationary.

True
False

QUESTION 7

Assume that the market for money clears, that is the quantity of money supplied equals the quantity of money demanded.

An increase in the money supply when real output is increasing and velocity is constant is not necessarily inflationary.

True
False

QUESTION 8

A decline in the rate of the growth of the money supply would be deflationary if velocity and real output are constant.

True
False

QUESTION 9

Base your answers to the following question on the last 10-K filed by New Century Financial Corporation for the fiscal year ended December 31, 2005.

Management of New Century had credit facilities with numerous financial institutions in order to finance mortgages until they could be pooled and sold or pooled and securitized.

True
False

QUESTION 10

Base your answers to the following question on the last 10-K filed by New Century Financial Corporation for the fiscal year ended December 31, 2005.

The credit facilities that New Century had with financial intuitions limited the amount of leverage New Century could use in its capital structure. The constraint is that the debt to equity ratio cannot exceed 10.

True
False

QUESTION 11

Base your answers to the following question on the last 10-K filed by New Century Financial Corporation for the fiscal year ended December 31, 2005.

When the mortgages on the balance sheet of New Century fell this depressed the value of New Century's net worth. If the net worth of New Century declined below $650 million the company would be in violation of debt covenants and would have to repay its mortgage warehouse lines of credit.

True
False

QUESTION 12

The cost of credit supplied to New Century from its various credit facilities was all based on a margin above the five year U. S. treasury rate.

True
False

Attachment:- multiply.xlsx

Reference no: EM13895869

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