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survey of economics

Questions and Answers of Survey Of Economics

=+b. The equilibrium interest rate
=+a. The money supply curve
=+Suppose the economy is currently suffering from an output gap and the Federal Reserve uses an expansionary monetary policy to close that gap. Describe the short-run effect of this policy on the
=+b. This year, the interest rate on a one-year bond is 4%; next year, it will be 1%. The interest rate on a two-year bond is 3%.
=+a. This year, the interest on a one-year bond is 4%; next year, it will be 10%. The interest rate on a two-year bond is 5%.
=+3. Malia must decide whether to buy a one-year bond today and another one a year from now, or buy a two-year bond today. In which of the following scenarios is she better off taking the first
=+ Illustrate with a diagram.
=+2. Now assume that the Fed is following a policy of targeting the federal funds rate. What will the Fed do in the situation described in Question 1 to keep the federal funds rate unchanged?
=+1. There is an increase in the demand for money at every interest rate. Draw a diagram showing the effect of this on the equilibrium interest rate for a given money supply.
=+c. Inan effort to increase holiday sales, stores offer one-year zero interest deals on purchases made with store credit c
=+b. To attract more deposits, banks raise the interest paid on six-month CDs.
=+a. In order to attract new customers, the new internet payment firm, PayBuddy, announces it will pay 0.5% interest on cash balances in a PayBuddy account.
=+ 2. Which of the following will increase the opportunity cost of holding cash or reduce it? Explain.
=+d. In order to avoid paying a sharp increase in taxes, residents of Laguria shift their assets into overseas bank accounts. These accounts are harder for tax authorities to trace but also harder
=+c. New wireless technology automatically charges supermarket purchases to credit cards, eliminating the need to stop at the cash register.
=+b. All prices fall by 10%.
=+a. Short-term interest rates rise from 5% to 30%.
=+1. Explain how each of the following would affect the quantity of money demanded. Does the change cause a movement along the money demand curve or a shift of the money demand curve?
=+ + Why do economists believe in monetary neutrality?
=+ + Why is monetary policy the main tool for stabilizing the economy?
=++ How does the Federal Reserve implement monetary policy?
=+ * Why does the liquidity preference model determine the interest rate in the short run?
=+What is the money demand curve?
=+much will deposits in the commercial banks change? By how much will the money supply change? Show the final changes to the T-account for commercial banks when the money supply changes by this
=+fixed amount of currency (so that all loans create an equal amount of deposits in the banking system), the minimum reserve ratio is 10%, and banks hold no excess reserves, by how
=+ew housing(thousands) 2500WORK IT OUT 36.Interactive Show the changes st to the T-accounts help with for the iFederal Reserve and for commercial banks when the Federal Reserve buys $50 million in
=+c. How could better regulation of financial institutions have prevented these two instances?
=+b. What caused the drop in new housing starts in 2006-2009?
=+ New housing starts are related to the availability of mortgages.
=+. The graph shows a large drop in new housing starts in 1984-1991 and 2006-2009.
=+ 15. The accompanying figure shows new U.S. housing starts, in thousands of units per month, between January 1980 and December 2016
=+Treasury securities, as they did in January 2007, the beginning of the graph in Figure 29-9, or does the Fed still own a large number of other assets, as it did in early 2017, the end of the graph
=+b. Do the Federal Reserve's assets consist primarily of U.S.
=+What percentage of the Federal Reserve’s total reserve bank credit is currently made up of U.S. Treasury bills?
=+Bank Credit.” What is the total amount of reserve bank credit under “Average of Daily Figures” for the most current week ended? What is the amount displayed for “U.S. Treasury securities”?
=+a. Under “Condition Statement of Federal Reserve Banks,” find the row “Reserve
=+link “Factors Affecting Reserve Balances — H.4.1.” Click on the link for the current release.
=+U.S. Treasury bills has declined since 2007. Go to www.federalreserve.gov. On the top of page, under “Data” and “Money Stock and Reserve Balances,” select the
=+14. As shown in Figure 29-9, the portion of the Federal Reserve's assets made up of
=+0.87% rate of interest, what is the amount of money U.S.taxpayers are losing per year because of these $45 million in counterfeit notes?
=+circulation.a. Why do USS. taxpayers lose because of North Korea’s counterfeiting?b. As of December 2016, the interest rate earned on one-year U.S. Treasury bills was 0.87%. At a
=+13. The Congressional Research Service estimates that at least $45 million of counterfeit U.S. $100 notes produced by the North Korean government are in
=+for the commercial banks when the money supply changes by this amount.
=+reserve ratio is 5%, by how much will checkable bank deposits in the commercial banks change? By how much will the money supply change? Show the final changes to the T-account
=+amount of checkable bank deposits in the banking system) and the minimum.
=+12. Show the changes to the T-accounts for the Federal Reserve and for commercial banks when the Federal Reserve sells $30 million in U.S. Treasury bills. If the public holds a fixed amount of
=+a voting member of the Federal Open Market Committee (FOMC).
=+find the Federal Reserve district in which you live. Go to www.federalreserve.gov/fomc/ and determine if the president of the regional Federal Reserve bank in your district is currently
=+a. Howwill the money supply change if the required reserve ratio falls to 5%?b. How will the money supply change if the required reserve ratio rises to 25%? 11. Using Figure 29-6,
=+deposits; the initial required reserve ratio is 10%. The commercial banks followa policy of holding no excess reserves. The public holds no currency, only checkable deposits in the banking system.
=+banks of Albernia have $100 million in reserves and $1,000 million in checkable
=+does. The commercial
=+d. The required reserve ratio is 10%, and a customer deposits $600 to her checkable bank deposit and holds it as cash. 10. Although the U.S. Federal Reserve doesn’t use changes in reserve
=+c. The required reserve ratio is 20%, and a customer deposits $750 to her checkable bank deposit and holds it as cash.
=+b. The required reserve ratio is 5%, and a depositor withdraws $700 from his checkable bank deposit and holds it as cash.
=+a. The required reserve ratio is 25%, and a depositor withdraws $700 from his checkable bank deposit and holds it as cash.
=+9. What will happen to the money supply under the following circumstances in a checkable-deposits-only system?
=+oI AaAUurwWH °Total af No terior can | | | | |
=+ What does this imply about the relationship between the public’s desire for holding currency and the money multiplier?Requir | Excess Held as Deposi | ed rese | reserve currenc Round ts Ives Ss
=+round 1.) How does your answer compare to an economy in which the total amount of the loan is deposited in the banking system and the public doesn’t hold any of the loan in currency?
=+that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 x 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in
=+8. In Westlandia, the public holds 50% of M1 in the form of currency, and the required reserve ratio is 20%. Estimate how much the money supply will increase in response to a new cash deposit of
=+much can checkable bank deposits increase?
=+ Can the commercial banks increase checkable bank deposits? If yes, by how
=+a. What is M1?
=+ratio of 10%. Given the following information, answer the questions 10%. Given the following information, answer the questions below.Bank deposits at the central bank = $200 million Currency held
=+7. The government of Eastlandia uses measures of monetary aggregates similar to those used by the United States, and the central bank of Eastlandia imposes a required reserve
=+these loans by taking cash from their checking deposits (at the same bank) to make repayment.c. If every time the bank decreases its loans, checkable bank deposits fall by the amount of the loan,
=+the amount of deposits it holds until its level of reserves satisfies its required reserve ratio. The bank reduces its deposits by calling in some of its loans, forcing borrowers to pay back
=+b. If the bank maintains a reserve ratio of 10%, how will it respond to the withdrawal? Assume that the bank responds to insufficient reserves by reducing
=+deposit in a different bank equal to the amount of the loan and the bank maintains a reserve ratio of 5%, by how much could the money supply expand in response to Tracy’s initial cash deposit of
=+d. If every time the bank makes a loan, the loan results in a new checkable bank
=+supply in the economy expand in response to Tracy’s initial cash deposit of $500?
=+c. If every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money
=+at the local bank. The reserve ratio is 10%.
=+5. Tracy Williams deposits $500 that was in her sock drawer into a checking account
=+£.A4$1,000 line of credit on your Target credit card
=+cc. $1,663 in your savings accountd. $459 in your checking accounte. 100 shares of stock worth $4,000
=+a. $95 on your campus meal cardb. $0.55 in the change cup of your car
=+4. Indicate whether each of the following is part of M1, M2, or neither:
=+account for these trends?ve BSR SSABe Ba SRER BASH vw EeSRERRSRSRERRSRAOcu 1 M en| Tr |Ch on cyjavjec|sa]_ |ey in | el | ka} vi | Ti} m cir| e | bl |ng| m | ar cur’s}ed|sdjed| ke lat| ch]
=+of Mi, and currency in circulation as a percentage of ‘M2. What trends or patterns about M1, M2, currency in circulation as a percentage of Mi, and currency in circulation as a percentage of M2
=+the month of December in the years 2006 to 2016 reported by the Federal Reserve Bank of St. Louis. Complete the table by calculating M1, M2, currency in circulation as a percentage
=+3. The following table shows the components of M1 and M2 in billions of dollars for
=+d. The town of Ithaca, New York, prints its own currency, the Ithaca HOURS, which can be used to purchase local goods and services.
=+c. For a brief time, Germany used paper money (the “Rye Mark”) that could be redeemed for a certain amount of rye, a type of grain.
=+b. Salt was used in many European countries as a medium of exchange.
=+a. Bottles of rum were used to pay for goods in colonial Australia.
=+2. There are three types of money: commodity money, commodity-backed money, and fiat money. Which type of money is used in each of the following situations?
=+e. You discover $0.25 under the floor mat in your car and deposit it in your savings account.
=+@. You discover $0.25 under the floor mat in your car and deposit it in your checking account.
=+c. You transfer money from your savings account to your checking account.
=+account.b. You sell a few shares of stock and put the proceeds into your checking account.
=+. For each of the following transactions, what is the initial effect (increase or decrease) on M1? On M2?a. You sell a few shares of stock and put the proceeds into your savings
=+Why do you think Congress enacted this legislation?
=+5. There are now laws restricting retailers’ ability to impose fees and expiration dates on their gift cards and mandate greater disclosure of their terms.
=+4. Explain why retailers prefer to reward loyal customers with gift cards instead of rebate checks.
=+ 3. Use your answer from Question 2 to explain why cash never “sells” at a discount.
=+2. Why do gift cards for Walmart sell for a smaller discount than those for the Gap?
=+Why are gift card owners willing to sell their cards for a cash amount less than their face value?

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