I had my assignment returned because I needed to provide the money multiplier number specific to the 1st and 2nd scenario of section 1 question C. I have included my assignment. What is the money multiplier numbers the Professor is requesting?

[BU204M4] Janet Howell This Assessment deals with money, the Federal Reserve System, and the effects of money growth on the rate of inflation. In this Assignment, assume you are hired as an assistant quantitative analyst at a bank and one of your duties is calculating reserves and loans based on the total deposits in the bank. Given the scenarios provided below, complete the tables and explain the computation results. This Assignment requires a combination of short paragraph answers, computations, and completion of a 450-500 word essay. Section 1: Deposits, Reserves and Loans This section deals with increase in money supply given two scenarios (see \"a\" and \"b\" below). In Westlandia, the public holds 50% of money one (M1) in the form of currency, and the required reserve ratio is 20%. a) Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table and calculate the new total money supply. (Hint: The first row shows that the bank must hold $100 in minimum reserves 20% of the $500 deposit against this deposit, leaving $400 in excess reserves that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in Round 1.) Round Deposits Required reserves Excess reserves Loans Loan proceeds Loan proceeds held as currency deposited 1 $500.00 $100.00 $400.00 $400.00 $200.00 $200.00 2 $200.00 $40.00 $160.00 $160.00 $80.00 $80.00 3 $80.00 $16.00 $64.00 $64.00 $32.00 $32.00 4 $32.00 $6.40 $25.60 $25.60 $12.80 $12.80 5 $12.80 $2.56 $10.24 $10.24 $5.12 $5.12 6 $5.12 $1.02 $4.10 $4.10 $2.05 $2.05 7 $2.05 $.41 $1.64 $1.64 $.82 $.82 8 $.82 $.16 $.66 $.66 $.33 $.33 9 $.33 $.07 $.26 $.26 $.13 $.13 10 $.13 $.03 $.10 $.10 $.05 $.05 Totals $833.25 $166.65 $666.60 $666.60 $333.30 $333.30 b) Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table and calculate the new total money supply. 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 does not hold any of the loans in currency? (Hint: Complete the table below when none of the loan proceeds are held in currency following the example for row 1.) [BU204M4] Janet Howell Round Deposits Required reserves Excess reserves Loans Loan proceeds Loan proceeds held as currency deposited 1 $500.00 $100.00 $400.00 $400.00 0.00 $400.00 2 $400.00 80 320 320 0 320 3 320.00 64 256 256 0 256 4 256 51.20 204.80 204.80 0 204.80 5 204.80 40.96 163.84 163.84 0 163.84 6 163.84 32.77 131.07 131.07 0 131.07 7 131.07 26.21 104.86 104.86 0 104.86 8 104.86 20.97 83.89 83.89 0 83.89 9 83.89 16.78 67.11 67.11 0 67.11 10 67.11 13.42 53.69 53.69 0 53.69 Totals 2,231.57 417.31 1,785.26 1,785.26 0 1,785.26 c) Calculate the Money Multiplier for question 1. a.) based on its computed change in money supply, and calculate the Money Multiplier for question 1. b.) based on its computed change in money supply. What does this imply about the relationship between the public's desire for holding currency and the money multiplier? Which scenario will contribute more to increase in money supply? a) The deposit increases to $833.25; the loans increase to $666.60; money supply will increase; and currency will increase to $333.30 for $200 original deposit. b) In this one economy currency and deposits increase, deposits total $1,398.32 (2231.57833.25) and the Loan proceeds increase $1451.96 (1785.26-333.30). If the public holds more money the supply of money will decrease. This decrease will decrease the size of the money multiplier. The supply of money will increase question b) because the public does not have currency. Section 2: The Federal Reserve Tools to Change Money Supply Explain how each of the following situations changes quantity of money (money supply) in the economy. a) The Federal Reserve System buys bonds The money supply increases when the Federal Reserve buy bonds. The money the Federal Reserve used to buy bonds becomes money supply in the economy. b) The Federal Reserve System auctions credit Money supply increases when the federal reserve auctions credit, the more money there is in the federal reserve the more money we have. [BU204M4] Janet Howell c) The Federal Reserve System raises the discount rate The money supply decreases when the Federal Reserve raises the discount rate. This reduces what will be available in the Reserve since it will discourage banks from borrowing. d) The Federal Reserve System raises the reserve requirement The money supply decreases when the Federal Reserve raises the reserve requirements. Section 3: Total Holdings of Banks and Balance Sheet Assume that in a country the total holdings of banks were as follows: Bank Required Reserve Excess Reserve Deposits Loans Treasury Bonds Amount in million dollars $45 $15 $750 $600 $90 a) Show that the balance sheet balances if these are the only assets and liabilities. XAssets Liabilities Required reserve $45 Deposits $750 Loans $600 b) Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks do not change their holdings of Treasury bonds? The excess reserves would increase if the reserve requirement ratio increased to 2%, loans would decrease. Teasury bonds $90 c) How much does the money supply change by? $750 million (1500-750) Excess reserve $15 Complete the following in 450-500 word essay. As an assistant quantitative analyst Totals $750 for this bank, what can you assume from $750 these results? What recommendations can you provide to your senior manager on loan rates, depending on the Federal Reserve System's ratio percentage? What should the bank do when [BU204M4] Janet Howell the Fed raises the discount rate and the Federal Funds Rate? What should the bank do when the Fed increases and decreases the reserve ratio to change the reserve requirement? Banks interest rates come from the federal funds, and is what banks charge each other for overnight loans to meet the requirements of the reserve. Banks can borrow money from the Federal Reserve or other banks that hold funds at the Fed if they can not meet the reserve requirements, but eh requirements for the loan from the Fed could be a percentage of assets held off to the side or a deposited in the Federal Reserve Bank. When that percentage ratio is increased, more cash is required to be stored int the vault making it expensive to acquire funds. When the Federal Reserve requirements is decreased, money supply is increased and easier to acquire capital. The discount rate is affected when the Fed raises or lowers the discount rate, influencing the federal fund ratio rate. If the discount rate is lowered then it will stimulate the economy, and banks and consumers can borrow at a reduced rate. This increases the money supply, economic growth and the rate of inflation. With the increased spending the next thing to worry about will be increase of inflation, and the cycles will go on