Business Finance
Economics -Money supply and Money multiplier equation

Question Description

I’m studying and need help with a Business question to help me learn.

Can anyone help me with these problems??

Complete the following problems

1.  Calculate the money multipliers for the following reserve requirements when individuals hold no cash;

a.  5%

b.  10%

c.  20%

d.  25%

e.  50%

2.  If the reserve requirement is 20% and individuals hold no cash, calculate the amount of government securities that the Fed would need to either buy or sell to increase the money supply by $2 million, and indicate if they buy or sell.

3.  Does the value of the dollar rise or fall for each of the following:

a.  Fed makes substantial purchase of securities

b.  Banks increase lending

4.  If the money supply is $500, the velocity is 8 and the price level is $2, calculate:

a.  The level of nominal output (GDP)

b.  The quantity of production

c.  If the money supply rises by 20%, calculate the new level of nominal output

d.  If prices remained unchanged, calculate the new quantity of production.

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Final Answer

ievordzor (181)
University of Maryland

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