ECO202Y1 Quiz: eco202 assignment 5 and self generated solutions.pdf

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magentagerbil794

2 Mar 2012

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Chapter 5, pages 98-100, questions 1, 2, 3, 4, 5, 6, 7. 1- suppose there is no money in the economy, and people only have bonds. Suppose people don"t keep cash at all, and commercial banks don"t keep excess reserves. 2- suppose there is no money in the economy, and people only have bonds. Suppose cash/deposit ratio is: cr = 1/9, and commercial banks don"t keep excess reserves. 3- suppose there is no money in the economy, and people only have bonds. bonds, and pays cash to the sellers. Suppose cash/deposit ratio is: cr = 1/9, and commercial banks keep. 4- use the is-lm model to predict the effects of the following shocks on income, the interest rate, consumption, investment. 5- consider the economy of hiksonia. a)- the consumption function is given by c = 200 + 0. 75 yd, yd = y-t. The government spending and taxes are both 100.

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The isolated nation of Islandia currently does not trade with other countries. The banking system of Islandia consists of four commercial banks' these banks deal with consumers and businesses and one central bank that deals exclusively with the commercial banks. The central bank has set a reserve requirement of 10 percent. The banks are creatively named First Bank, Second Bank, Third Bank, and Fourth Bank. All of the commercial banks, except First Bank, have used all of their excess reserves to issue loans to consumers and businesses. First Bank is holding $288,000 in excess reserves.

Suppose First Bank loans all of its excess reserves to a customer to buy a custom-built house. The home builder deposits all of the money received for building the house into Second Bank, which then lends all its excess reserves to a customer to buy machines for her factory. The machine manufacturer deposits all of the money received into Third Bank, which lends all its excess reserves to a clothing maker to buy textiles. The textile manufacturer deposits all of the money received into Fourth Bank, which lends all its excess reserves to a rancher to buy more cattle. By how much have these rounds of lending increased the money supply in Islandia?

Instructions: Round your answer to 2 decimal places.

taupecoyote41

Which of the following would reduce the money supply?

a. Commercial banks use excess reserves to buy government bonds from the public.

b. Commercial banks loan out excess reserves

c. Commercial banks sell government bonds to the public

d. A check clears from Bank A to Bank B

beigehound405

Which of the following would reduce the money supply:

a. Commercial banks use excess reserves to buy government bonds from the public.

b. Commercial banks loan out excess reserves.

c. Commercial banks sell government bonds to the public

d. A check clears from Bank A to Bank B.

aquamarinezebra140

ECO202Y1 Quiz: eco202 assignment 5 and self generated solutions.pdf

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