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Suppose Fred deposits $8,000 in cash into his checking account at the Bank of Bonzo. The Bank of Bonzo has no excess reserves and is subject to a 5 percent required reserve ratio.
a. Show this transaction in a T-account for the Bank of Bonzo.
b. Assume the Bank of Bonzo makes the maximum loan possible from Fred’s deposit to Clarice and show this transaction in a new T-account.
c. Clarice decides to use the money she borrowed to take a trip to Tahiti. She writes a check for the entire loan amount to the Tropical Paradise Travel Agency, which deposits the check in its bank, the Iceberg Bank of Barrow, Alaska.When the check clears, the Bonzo Bank transfers the funds to the Iceberg Bank. Show these transactions in a new T-account for the Bonzo Bank and in a T-account for the Iceberg Bank.
d. What is the maximum amount of deposits that can be created from Fred’s initial deposit?
e. What is the maximum amount of loans that can be created from Fred’s initial deposit?
Suppose the market for autoworkers is in equilibrium when the automakers purchase capital goods to produce more fuel efficient automobiles and these capital goods are a substitute for workers. What happens in market for autoworkers?
The first step in comprising the value of this stock today, is to compute the value of the stock when it reaches constant growth in year.
a nation to have commercial relations with other countries
a powerful leading indicator of overall future economic activity. Elucidate why is it a more meaningful indictor than housing starts.
Consider a firm with the following Cobb-Douglas production technology: f(k; l) = [k^(3/4)l^(1/4)] Suppose the firm faces competitive factor markets and wants to minimize the production cost of producing y units of output. a) Write down the firm's cos..
In 2005 the US was close to full employment, but many observers and economists were worried about its trade deficit, which was over $700 billion per year. Suppose macroeconomic policymakers wanted to maintain the level of real GDP
As the marketplace is in equilibrium, the required returns of the two stocks should be the same.
Illustrate what are some of the comparative advantages for the companies to operate in the host country.
East Chicago is a major production center of steel in the United States. In the process of producing steel, the firms in this area emit pollution both into the air and into the water which adversely affect Indiana residents. The EPAhas determined ..
Use the classical model and the quantity theory of money to predict how each of the following shocks would affect the real wage rate (W/P), the real interest rate (r), real aggregate income (Y), and the price of goods and services (P) in a closed ..
Your production line has recently been producing a serious defect. One of two possible processes, A and B, could be the culprit. From past experience you know that the probability that A is causing the problem is 0.8 but investigating A costs $100..
Discuss the difference among inflationary gap also deflationary gap.
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