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1.If the required reserve ratio (rr) is 20%, What is the simple deposit multiplier (d)? If, in addition, the currency-to-deposit ratio is 5% and the
1.If the required reserve ratio (rr) is 20%, What is the simple deposit multiplier (d)? If, in addition, the currency-to-deposit ratio is 5% and the excess reserve-to-deposit ratio is 15%, what is the money multiplier (mm) now? If deposits increase by $ 100,000, how much will the money supply change in the case of the simple deposit multiplier and in the case of the money multiplier? Explain why the simple deposit multiplier and the money multiplier yield different results? 3 If the economy is near full employment and the exchange rate increases (the dollar appreciates), explain why the Federal Reserve will be less inclined to raise interest rates. (8) 4.Use the following data to answer this question. SavingsS = 150; Investment I = 100 TaxesT = 250; Government PurchasesG = 500 A. Calculate the level of private savings, public savings, national savings, and net exports from the following information. B. Do we have a trade surplus or deficit in this economy? What is capital outflow? What is capital inflow? What does the results in part A imply about capital inflow (or outflow)? 5.Using the foreign exchange market diagram, graphically illustrate and explain the impact of foreign interest rates that exceed U.S. interest rates, all else constant, on the exchange rate
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