Quetions from sec. 3 A B C Sec 2 C Sec 1 B
KadowBU204M4_Template 2 (2) - Word Kelly kadow X File Home Insert Design Layout References Mailings Review View Help Tell me what you want to do & Share go Cut Find - Paste a Copy Times New R V 12 V A A Aa - AaBbCcC AaBbCc AaBbCcl AaBbCcC AaBbCcC AaBbCcC AaBbCCC AaBbCcE Aab Format Painter BI U - abe X2 x A - Z - A- 1 Body Text 1 Heading 1 1 Heading 2 1 List Para... 1 No Spac... 1 Normal 1 Table Pa.. Heading 3 Title Sac Replace Select - Clipboard Font Paragraph Styles Editing (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 x 0.5 = $200 of the loan will Snipping Tool X be deposited in round 2 from the loan granted in Round 1.) New Mode . Delay * X Cancel Options Round Deposits Required Excess Loans Loan proceeds Loan proceeds Select the snip mode using the Mode button or click the New reserves reserves held as currency deposited button. 1 $500.00 $ 100.00 $400.00 $400.00 $200.00 $200.00 Snipping Tool is moving... 2 $200.00 $40.00 $160.00 $160.00 $80.00 $80.00 In a future update, Snipping Tool will be moving to a new home. Try improved features and snip like usual 3 $80.00 $16.00 $64.00 $64.00 $32.00 $32.00 with Snip & Sketch (or try the shortcut Windows logo key + Shift + S). 4 $32.00 $6.40 $25.60 $25.60 $12.80 $12.80 Try Snip & Sketch 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 $0.41 $1.64 $1.64 $0.82 $0.82 8 $0.82 $0. 16 $0.66 $0.66 $0.33 $0.33 9 $0.33 $0.07 $0.26 $0.26 $0.13 $0.13 10 $0. 13 $0.03 $0. 10 $0. 10 $0.05 $0.05 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? Page 1 of 5 1374 words - - + 100%KadowBU204M4_Template 2 (2) - Word Kelly kadow X File Home Insert Design Layout References Mailings Review View Help Tell me what you want to do & Share go Cut a Copy Times New R V 12 V A A Aa - A AaBbCcC AaBbCc AaBbCcl AaBbCcC AaBbCcC AaBbCcC AaBbCCC AaBbCcD Aab Find - Sac Replace Paste Format Painter BI U - abe X2 X' A - Z - A- E 1 Body Text 1 Heading 1 1 Heading 2 1 List Para... 1 No Spac... 1 Normal 1 Table Pa... Heading 3 Title V Select - Clipboard Font Paragraph Styles Editing (Hint: Complete the table below when none of the loan proceeds are held in currency following the example for row 1.) Required Excess Loan proceeds Loan proceeds Round Deposits reserves reserves Loans held as currency deposited 1 $500.00 $100.00 $400.00 $400.00 0.00 $400.00 2 $400.00 $80.00 $320.00 $320.00 0.00 $320.00 3 $320.00 $64.00 $256.00 $256.00 0.00 $256.00 4 $256.00 $51.20 $204.80 $204.80 0.00 $204.80 5 $204.80 $40.96 $ 163.84 $163.84 0.00 $163.84 6 $163.84 $32.77 $131.07 $131.07 0.00 $131.07 7 $131.07 $26.21 $ 104.86 $104.86 0.00 $104.86 8 $104.86 $20.97 $83.89 $83.89 0.00 $83.89 9 $83.89 $16.78 $67.11 $67.11 0.00 $67.11 10 $67.11 $13.42 $53.69 $53.69 0.00 $53.69 Totals $2231.57 $446.31 $1785.26 $1785.26 0.00 $1785.26 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? What are the specific money multiplier numbers in each scenario? Page 2 of 5 1374 words - - + 100%KadowBU204M4_Template 2 (2) - Word Kelly kadow X File Home Insert Design Layout References Mailings Review View Help Tell me what you want to do & Share 86 Cut Copy Times New R V 12 |A A Aa - A AaBbCCC AaBbCc AaBbCcl AaBbCcC AaBbCcC AaBbCcC AaBbCcC AaBbCcD Aab Find - Paste 1 Body Text 1 Heading 1 1 Heading 2 1 List Para... 1 No Spac... 1 Normal 1 Table Pa.. Heading 3 Gac Replace Format Painter B I U - abe X2 X? A - Z - A- Title Select - Clipboard Font Paragraph Styles Editing Section 3: Total Holdings of Banks and Balance Sheet Assume that in a country the total holdings of banks were as follows: Bank Amount in million dollars Required Reserve $45 Excess Reserve $15 Deposits $750 Loans $60 Treasury Bonds $90 a) Show that the balance sheet balances if these are the only assets and liabilities. | 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? c) How much does the money supply change by? Section 4: Monetary Policy Tools Application Complete the following in 450-500 word essay. As an assistant quantitative analyst for this bank, what can you assume from 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 Page 3 of 5 1374 words + 100% Type here to search O 9:37 AM 7/19/2020
