money and the banking system

Apr 16th, 2014
SKTFaker
Category:
Economics
Price: $45 USD

Question description

15. How would the following influence the growth rates of the M1 and M2 money supply figures over time?

a.  an increase in the quantity of US currency held overseas

b. a shift of funds from interest-earning checking deposits to money market mutual funds

c. a reduction in the holdings of currency by the general public because debit cards have become more popular and widely accepted

d. the shift of funds from money market mutual funds into stock and bond mutual funds because the fees to invest in the latter have declined.

17. Suppose that the reserve requirement is 10 percent and the balance sheet of the People's National Bank looks like the accompanying example.

a. What are the required reserves of People's National Bank? Does the bank have any excess reserves?

b. What is the maximum loan that the bank could extend?

c. Indicate how the bank's balance sheet would be altered if it extended this loan.

d. Suppose that the required reserves were 20 percent.  If this were the case, would the bank be in a position to extend any additional loans?  Explain.


Assets                                                    Liabilities

Vault cash $20,000                                 checking deposits   $200,000

Deposits at Fed $30,000                         Net worth                $15,000

Securities $45,000

Loans $120,000


4.  Historically, shifts toward a more expansionary monetary policy have often been associated with increases in real output.  Is this surprising? Why or why not? Can an expansion in the money supply increase real output and employment?  Why or why not?

5. What inpact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run?  Explain.

14. Did monetary policy contribute to the economic crisis of 2008? Why or why not? How did monetary policy makers respnd to this crisis? Has their response created an environment for future stabililty and growth?  Explain

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