The money Mr. Black borrows is deposited in Bank D. Bank D lends its excess reserves to Mr. Green. Show Bank D's balance sheet alter the loan has been made out. BM D Assets liabilities Resumes Deposits If the above process eontim1es to completion; the 0110an totals will exist for the banking system: Part T: Deposits T Part 8: Reserves Part 9: Loans Question 20: (7 points) Assuming that GDP is fixed, fill in the missing values for Total Amount of Money Demanded Transactions demand = 4,700 Money Supply 1 (Ms1) = 5,700 Money Supply 2 (Ms2) = 5,200 Rate of Interest Money Demanded for Asset Purposes Total Amount of Money Demanded 22 % 500 20% 1,000 18 % 1,500 16% 2,000 14% 2,500 At money supply Ms1, the equilibrium interest rate is At money supply Ms2, the equilibrium interest rate is Question 21: (4 points) Fill in the blanks: The gains from specialization and trade depend on the existence of? Absolute Advantage or Comparative ARvantageQuestion 12: (8 points) Using the data in the table below, answer the following questions. (Hint: draw a graph when possible) Interest Rate% Money Demand (billions of dollars) 18 120 17 140 16 160 15 180 14 220 13 280 12 340 11 420 10 520 Assume that the money supply is equal to 180 (do not use % signs in your answers) Part 1: What is the equilibrium rate of interest? Part 2: Assume that the Bank of Canada buys bonds and increases the money supply to 340 What is the equilibrium rate of interest? Part 3: A fall in income causes the demand for money to by 60 billion. If the money supply is 100, what is the equilibrium rate of interest? Part 4: Assuming the change in part 3, if money supply is 360, what is the equilibrium rate of interest? Part 5: An increase in income causes the transaction demand for money to by 40 billion at each interest rate. (Assume the change in part 3 did not occur. Given a money supply of 180, what is the equilibrium rate of interest? Part 6: Given the change in part 5, if money supply is 320, what is the equilibrium rate of interest?Queellon 13: (15 points) The balance sheet belov.r shows the effect of a new 1,800 deposit in Bank A. Assume that the commercial banks have established a 13 percent desired reserve and that no bank holds excess reserves. BANKA Asset Liabilities Reserves 1,800 Deposits 1.300 Assume that Bank A lends its excess reserves to Mr. Jones who spends the proceeds of the loan. Show Bank A's new balance sheet 7 T BANK A Asset Liabilities Reserves Deposits Loans The money Mr. Jones borrows is deposited in Bank B. Bank B lends its excess reserves to Mr. Smith. Show Bank B's balance sheet aerthe loan has been made out. BANK B Asset Liabilities Reserves Deposits Loans The money Mr. Smith borrows is deposited in Bank C. Bank C lends its excess reserves to Mr. Black. Show Bank C's balance sheet aerthe loan has been made out. BANK C Asset Liabilities Reserves Deposits Loans The money Mr. Black borrows is deposited in Bank D. Bank D lends its excess reserves to Mr. Green. Show Bank D's balance sheet alter the loan has been made out. BANK D Asset Liabilities Reserves Deposit Loans If the above process continues to completion, the following totals will exist for the banking system
