3. Suppose that at present total currency in the Philippine economy is presentlyPHP5.5 trillion, total reserves are PHP3.5 trillion.a) How large is the monetary base?b)If the reserve-deposit ratio is 40%, then how large are total demand andcheckable deposits?c)How large is the money multiplier?d) How large is the money supply? (Derive using the monetary base andmoney multiplier.)e)A year from now, the monetary base increases by 10%. Assuming a constantmoney multiplier, what is the additional money supply a year from now (inPHP)?f) The BSP suddenly raises the reserve ratio by 10% (while the currency-deposit ratio stays the same). What is the new money multiplier?

The total amount of money that is either held by the general public as legal tender or that is held…

3. Suppose that at present total currency in the Philippine economy is presently PHP5.5 trillion, total reserves are PHP3.5 trillion. How large is the monetary base? b) If the reserve-deposit ratio is 40%, then how large are total demand and checkable deposits? c) How large is the money multiplier?

3. Suppose that at present total currency in the Philippine economy is presently PHP5.5 trillion, total reserves are PHP3.5 trillion. How large is the monetary base? b) If the reserve-deposit ratio is 40%, then how large are total demand and checkable deposits? c) How large is the money multiplier?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

Section: Chapter Questions

Problem 9PA

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16. Suppose that the Federal Reserve conducts an open market operation in which it purchases $100 in US Treasury bonds from a private saver. (a) In an economy without banks, by how much, in dollar terms, will the total money supply increase as a result of this open market operation? (b) In an economy with banks in which all members of the nonbank public immedi- ately deposit all of the currency they receive, but in which all banks engage in 100 percent reserve banking, by how much will the total money supply increase as a result of this open market operation? (c) In an economy with banks, in which all banks choose a 10% reserve ratio and in which all members of the nonbank public immediately deposit all of the currency they receive, by how much will the total money supply increase as a result of this open market operation? (d) In an economy with banks, in which all banks choose a 10% reserve ratio, but in which all members of the nonbank public hold 50% of the funds they receive as…
2. Assume the reserve requirement forya banking system is 20%. Under the typical assumptions corresponding with the money multiplfer, if an autonomous injection of $10,000 is made, how will it affect: (a) The initial required reserves of the individual bank into which this deposit is made? (b) The initial excess reserves of the individual bank into which this deposit is made? (c) Total deposits in the entire banking system after all of the repercussions of this injection?. (d) Are there any factors that might not allow this to work in the real world in the way economic theory might suggest? If so, what are they?
9. How can banks create money? A) By lending required reserves B) By borrowing excess reserves C) By telling the Fed they need more money; and the Fed creates it D) By lending excess reserves 10. What is the formula for figuring the total possible change in the money supply from excess reserves? A) (1/Excess reserves) × / Total Reserves B) (R/1) × A Reserves C) / Excess Reserves / Total Reserves D) (1/R)x A Reserves
8. The reserve requirement, open market operations, and the moneysupply Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the case in the U.S. prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) 5 10 Simple Money Multiplier A lower reserve requirement is associated with a Money Supply (Dollars) money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that,…
6. The reserve requirement, open market operations, and the moneysupply Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the case in the U.S. prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $100. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Money Supply (Dollars) (Percent) Simple Money Multiplier 15 10 A lower reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $100. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that,…
8. The reserve requirement, open market operations, and the money supply Consider a banking system where the Federal Reserve uses required reserves to control the money supply. (This was the case in the U.S. prior to 2008.) Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $300. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement Money Supply (Dollars) (Percent) Simple Money Multiplier 5 10 A higher reserve requirement is associated with a money supply. Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds. Now, suppose that,…
3. Suppose that in a given year the money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion. a) Calculate the price level in this economy. b) Calculate the velocity of money in this economy. c) Assume that the velocity of money is constant (it does not change). If the economy’s output of goods and services increases by 5 percent in a year, what will happen to the price level if the Federal Reserve keeps the money supply unchanged? d) What option could the Federal Reserve implement if it wanted to avoid the outcome described in the previous question? Explain.
2. What “backs" the money supply in the United States? What determines the value (domestic purchasing power) of money? How does the purchasing power of money relate to the price level? Who in the United States is responsible for maintaining money's purchasing power? There is ( no, some ) concrete backing to the money supply in the United States. Paper money, which has ( some, no ) intrinsic value, has value only because people are willing to accept it in exchange for goods and services, including their labor services as employees. And people are willing to accept paper as money because they know that everyone else is also willing to do so. If the monetary authorities were issuing new banknotes at a rate far in excess of available output, the acceptability of paper money would (increase, diminish ). People would start to worry about whether the banknotes would be worth much after they received them. Checks are part of the money supply and ( are, are not) legal tender, but people accept…
Pls help with this Suppose that the Central Bank has currently set the reserve requirements in the economy to be equal to 10%. Assume that there is no cash drain. Suppose also that in this economy there are $400 in initial deposits and $6,000 of cash. 6. Given the above, what is the total Money Supply (MS) in the economy?Now suppose that the economy’s demand for money (MD) is given by the following equation: ??=12,000−1,000∗rWhere r is the interest rate in integers (e.g. at a 2% interest rate, r = 2). 7. What is the equilibrium quantity of money (M) and interest rate (r) in this economy? Now suppose that the Central Bank wants to close an output gap in the economy, and wants to raise the interest rate by 2% to do this. Assume that the Central Bank targets the Money Supply directly. 8) If the Central Bank wants to change the Money Supply by changing the quantity of cash in the market in order to achieve this interest rate increase, how much does it need to change the quantity of cash?…
ls help with this Suppose that the Central Bank has currently set the reserve requirements in the economy to be equal to 10%. Assume that there is no cash drain. Suppose also that in this economy there are $400 in initial deposits and $6,000 of cash. 6. Given the above, what is the total Money Supply (MS) in the economy?Now suppose that the economy’s demand for money (MD) is given by the following equation: MD=12,000−1,000rWhere r is the interest rate in integers (e.g. at a 2% interest rate, r = 2). 7. What is the equilibrium quantity of money (M) and interest rate (r) in this economy? Now suppose that the Central Bank wants to close an output gap in the economy, and wants to raise the interest rate by 2% to do this. Assume that the Central Bank targets the Money Supply directly. 8) If the Central Bank wants to change the Money Supply by changing the quantity of cash in the market in order to achieve this interest rate increase, how much does it need to change the quantity of cash? […
2 Which of the following will increase the amount of moeny one wishes to hold? a) an increase in the interest rate increase b) a reduction in the interest rate increase c) a reduction in income d) none of the above 1.5 At the current interest rate, suppose the supply of money is less than the demand for money. Given this information, we know that: a) the price of bonds will tend increase. b) the price of bonds will tend to fall. c) production equals demand. d) the goods market is in equilibrium.
PRICE LEVEL Adjust the graph to show the long-run effect of an unanticipated expansionary monetary policy on the goods and services market by dragging the es aggregate demand (AD) curve, the short-run aggregate supply (AS) curve, or both. g and Study Tools 1 Options The Market for Goods and Services ge Success Tips er Success Tips AS DED FOR YOU AD dy Tools AS s for Principles of AD Feedback REAL GDP V in real GDP and a "An expansionary monetary policy when the economy is at full employment leads to a V in the price level. True or False: An expansionary monetary policy can promote long-term grovwth. O False 4:3 86 F Partly sunny 8/ O Type here to search