1 answer

Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit...

Question:

Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.
Assume the money supply is $850 billion, total deposits are $500 billion and the required reserve-deposit ratio is 10%, if the Central Bank purchases $60 million worth of Treasury bills, what is the greatest amount by which total money supply could change? Do you expect that money supply would actually change by that much? Find the maximum value of deposit multiplier for this economy. Explain, why this value is the maximum value.

Answers

Deposit multiplier = 1/required reserve ratio = 1/10%

Deposit multiplier = 10

If 60 million treasury bills are purchased,

Maximum Change in money supply = 60*10 = $600 million           (money supply will increase)

Money supply will not change up to that level, because some of the cash withdrawn, will not be deposited back in the bank. Some of the money will be kept at home for some emergency purposes. So, multiplier effect will not work and total maximization in money supply will not increase.

.

Similar Solved Questions

1 answer
Please show easy to follow work, thanks a lot! Question 1 (1 point) d The motion...
Please show easy to follow work, thanks a lot! Question 1 (1 point) d The motion of a particle is defined by the relationx- at 3-bt 2+ct + d, where x and t are expressed in meters and seconds, respectively, and a - 2.00, b- 9.00, c 4.00 and d 6.00 are constants. Determine the acceleration of the par...
1 answer
Homework 4-3: Problem 4 Previous Problem List Next (1 point) Find the general solution to y"...
Homework 4-3: Problem 4 Previous Problem List Next (1 point) Find the general solution to y" + 4y' + 29y = 0. In your answer, use e, and to denote arbitrary constants and t the independent variable. Enter as c1 ando as c2. Preview My Answers Submit Answers You have attempted this problem 0 t...
1 answer
3/10x - 16 = 9/10x + 4 equals what?
3/10x - 16 = 9/10x + 4...
1 answer
After reading all the available information carefully, prepare a two page (double-spaced) essay and answer the...
After reading all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.50Y Ip=100-20r Mt=0.10Y Ms=100-10r M=80 a. Build the IS-LM function. b. If we assume an increase in Investments by 100 u...
1 answer
(e) The distribution of each random variable on the left matches with a distribution on the...
(e) The distribution of each random variable on the left matches with a distribution on the right, and no distribution on the right is matched twice. Write the correct letter next to each random variable on the space provided. You do not have to know any of the sample means or variances to do the ma...
1 answer
Rses/21573/pages/assignment-1?module item id-637690 liari hatt Egi -Canvas D 温哥华出租温哥华6 铡Yellow Tag Sale An ○ YouTube D...
rses/21573/pages/assignment-1?module item id-637690 liari hatt Egi -Canvas D 温哥华出租温哥华6 铡Yellow Tag Sale An ○ YouTube D https://surfstat anu 5. involving random permutations are common in the fields of image encryption and in- forma...
1 answer
In experiment 1 you prepared a solution of sodium carbonate. This means you dissolved solid Na2CO3...
In experiment 1 you prepared a solution of sodium carbonate. This means you dissolved solid Na2CO3 in water. Since this ionic compound dissolved in water, you now have only its ions swimming around in the solution. What are the aqueous ions in your solution of sodium carbonate? TTT Arial # 3 (12 # T...
1 answer
QUESTION 4 A coherent light source, X = 24 nm, is used to scatter off a...
QUESTION 4 A coherent light source, X = 24 nm, is used to scatter off a crystal material, the light is incident/and reflected on the crystal at an angle of 65º from the normal the reflected light is in the 3rd order. What is the crystalline plane separation 26.4 nm 85.2 nm 0.45 nm 156 nm...
1 answer
Cost of Goods Sold Sexton Corp. has current liabilities of $263,000, a quick ratio of .75,...
Cost of Goods Sold Sexton Corp. has current liabilities of $263,000, a quick ratio of .75, inventory turnover of 10.35, and a current ratio of 1.25. What is the cost of goods sold for the company?...
1 answer
Explain the role of Contract Manufacturer and Logistics Intermediaries in Coca Cola Company ?
Explain the role of Contract Manufacturer and Logistics Intermediaries in Coca Cola Company ?...
1 answer
Results for this submission Result 0 05 004 0.05 At least one of the answers above...
Results for this submission Result 0 05 004 0.05 At least one of the answers above is NOT correct (1 point) An introduciory college course contains 45 students, 25 are Freshmen and 20 are Sophomores A student is chosen at random from those in the course, assume that each student is equalily likely C...
1 answer
A 66 kg gymnast is at the top of a swing on the high bar. Her...
A 66 kg gymnast is at the top of a swing on the high bar. Her velocity is 2.3 m/s and she is 3.8 m high. What is the gymnast's total mechanical energy of this instant?...
1 answer
1. (15 pts.) The results of our MIDTERM in MATH 279 are as follows: 75,22,36,34,55,56,27,83,17,58,57,42,58,52,42,82,27.92.52,42,100,83,27,58,52. (a)...
1. (15 pts.) The results of our MIDTERM in MATH 279 are as follows: 75,22,36,34,55,56,27,83,17,58,57,42,58,52,42,82,27.92.52,42,100,83,27,58,52. (a) Find the mean and standard deviation. (b) Display the data in a stem-and-leaf plot. (C) Find the median and quartiles. 2. (14 pts.) Let X denote the nu...
1 answer
3. The United Kingdom (UK) held a national referendum (vote) on whether the UK should remain...
3. The United Kingdom (UK) held a national referendum (vote) on whether the UK should remain in the European Union (EU), or should exit the EU. Exiting the EU is likely to have several consequences: (1) increased barriers to trade between the UK and the remaining EU countries; (2) Reduced refugee fl...
1 answer
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the...
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $123,.288. (FV of $1. PV of $1. FVA of S1. PVA of S1. FVAD of $1 and PVAD of S) (Use appropriate factorls) from the tables prov...