Homework 5 - Maximum number of choices allowed is{0 Submitted by ZEHLER IAN(IFZ5002 on 4:39:15 PM Select regrade mode Choose a regrade mode Change

# Homework 5 - Maximum number of choices allowed is{0...

• Homework Help
• 26
• 99% (71) 70 out of 71 people found this document helpful

This preview shows page 1 - 5 out of 26 pages.

Maximum number of choices allowed is {0}.Submitted by ZEHLER, IAN (IFZ5002) on 3/26/2015 4:39:15 PMSelect regrade mode Choose a regrade mode Change points or correct answer Drop question Give full credit This regrade will affect all users who submitted this Assessment containing this question. Regrade not available This is a linked Assessment or Question. Only the owner has edit rights. Regrade not available This content item's settings prohibit regrade on this item. Points Awarded80.00Points Missed20.00Percentage80.0%1. Money Supply ProblemYou are hired by the Chair of the Federal Reserve to manage the trading desk at the New York Fed and the Chair tells you that he wants you to increase the money supply (M1) by 33.33 percent. They warn you to be careful because in these uncertain times, the money multiplier Ok CancelCancelCancel
tends to become very unstable. They suggest that you stay ‘closely connected’ with the bankingsector and then gives you a list of phone numbers to do so. Note that in this problem we are targeting the growth rate of M1.Reserve Market Initial Conditions (Scenario A)rr/D= .10C = 400 bD = 2000 bER = 0 (not a typo)M = C + DUse the initial conditions IN SCENARIO A above to answer #1-3.What is the MB?2. What is the money multiplier?Correct Answer(s):C
3. What is the money supply? Use mm x MB to calculate this.Correct Answer(s):D4. Scenario B:So you decide to inject \$100 billion in reserves via open market purchases with phone in hand. Recall, the Chair said to watch that multiplier and so you start making some calls. Just as you suspected, the banks aren’t making any loans, that is, they are sitting on all \$100 billion in excess reserves.Given these new conditions from SCENERIO B, answer #4-6.What is the MB?Correct Answer(s):B5.
What is the money multiplier? Round to 3 decimal places.Correct Answer(s):A6. What is the money supply? Use mm x MB to calculate this and Round to the nearest whole number.Correct Answer(s):D