I need help for my ECON homework
yu.tewAssignment 6 answers
1. Fractional, less than 100%
2. Not changed
3. Actual, required
4. An asset, a liability
5. Increases, increases
6. A (reserve ratio * liabilities = required reserves. Subtract required reserves from actual reserves to find the excess reserves)
7. D (excess reserves are determined by multiplying the required reserve ratio by the amount of new deposits (and in this case, new loans). Therefore, $2100 * x = $700. X is your answer.)
8. B (According to #6 in the summary for chapter 15, "a commercial bank can lend only an amount equal to its excess reserves". Therefore, if a bank has excess reserves of $500 but lends $1000, they will be short $500)
9. C (the money multiplier is 1/.3= 3.333. Multiply this by $60 million, which gives you $200 million).
10. C (The maximum expansion of checkable deposits is equal to the initial excess reserves multiplied by the money multiplier. In this case, the excess reserves are the amount loaned out, or $80,000. The money multiplier is the reciprocal of the reserve ratio. Multiply $80,000 by that reciprocal to get your answer)
11. D
12. 35, 40, 36; multiply checkable deposits by the required reserve ratio of 20% (for example, 20% of 175 is 35)
13. 5, 0, 4; subtract required reserves from reserves (for example, for the first column reserves are 40. Subtract 20% of 175 (or 35) from this, and your excess reserves are 5).
14. 5, 0, 4; the amount of excess reserves is the amount available to lend
15. Excess reserves are the amount by which a bank’s or thrift’s actual reserves exceeds its required reserves. Excess reserves are calculated by subtracting required reserves from actual reserves.
16. Price level, full
17. increase, decrease
18. Government securities, loan to, Treasury deposits, reserves of, Federal Reserve Notes
19. More, increase
20. Federal funds, prime interest, Federal funds
21. Decrease, decrease, increase, decrease, tight
22. Lags, inflation, recession
23. A
24. B (first, figure out the transaction demand (10% of the nominal GDP in this case). The asset demand represents the difference between the transaction demand and the money supply. Once you know the asset demand, the corresponding interest rate is your answer.)
25. C
26. D
27. B
28. B
29. An expansionary monetary policy expands the money supply, puts downward pressure on other interest rates, and helps to stimulate aggregate demand. An expansionary monetary policy can be implemented by actions of the Federal Reserve to buy government securities in open-market operations to lower the Federal funds rate.
30. A restrictive monetary policy contracts the money supply, puts upward pressure on other interest rates, and helps to reduce aggregate demand to maintain a stable price level. A restrictive monetary policy can be implemented by actions of the Federal Reserve to sell government securities in open-market operations that raises the Federal funds rate.
31. Monetary policy is quick and more flexible than fiscal policy, and is also more protected from political pressure.