1. Why is the money multiplier considered to be a potential multiplier rather than an indication of exactly how much multiplication should be expected?
2. If you deposit $6,000 in a bank, calculate how much the bank must keep as required reserves and how much it can loan out if the required reserve ratio was 5percent. What would be the money multiplier?
3. Name four of the six primary functions of the central bank.
4. Explain how monetary policy can be used to close the (a) contractionary gap and (b) inflationary gap.
5. Discuss some the difficulties associated with expansionary monetary policy
6.What is your take on the amount of money politicians spend on political campaigns? Does it have a positive/negative impact on the economy?
1. Why is the money multiplier considered to be a potential multiplier rather than an indication of exactly how much multiplication should be expected?
2. If you deposit $6,000 in a bank, calculate how much the bank must keep as required reserves and how much it can loan out if the required reserve ratio was 5percent. What would be the money multiplier?
3. Name four of the six primary functions of the central bank.
4. Explain how monetary policy can be used to close the (a) contractionary gap and (b) inflationary gap.
5. Discuss some the difficulties associated with expansionary monetary policy
6.What is your take on the amount of money politicians spend on political campaigns? Does it have a positive/negative impact on the economy?
Related textbook solutions
Related questions
Changes in Monetary Policy:
Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place:
|
Balance Sheet for Ecoville International Bank |
|||
|
ASSETS |
LIABILITIES |
||
|
Cash |
$33,000 |
Demand Deposits |
$99,000 |
|
Loans |
66,000 |
||
Required:
Now assume that the Fed lowers the reserve requirement to 8%.
1- What is the maximum amount of new loans that this bank can make?
2- Assume that the bank makes these loans. What will the new balance sheet look like?
3- By how much has the money supply increased or decreased?
4- If the money multiplier is 5, how much money will ultimately be created by this event?
5- If the Fed wanted to implement a contractionary monetary policy using reserve requirement, how would that work?
Changes in Monetary Policy
Prepare a 2-3 page analysis by answering the questions below. Be sure to cite your references using APA format.
Assume that the Bank of Ecoville has the following balance sheet and the Fed has a 10% reserve requirement in place:
|
Balance Sheet for Ecoville International Bank |
|||
|
ASSETS |
LIABILITIES |
||
|
Cash |
$33,000 |
Demand Deposits |
$99,000 |
|
Loans |
66,000 |
||
Required:
Now assume that the Fed lowers the reserve requirement to 8%.
1- What is the maximum amount of new loans that this bank can make?
2- Assume that the bank makes these loans. What will the new balance sheet look like?
3- By how much has the money supply increased or decreased?
4- If the money multiplier is 5, how much money will ultimately be created by this event?
5- If the Fed wanted to implement a contractionary monetary policy using reserve requirement, how would that work?
