quanda29 - Chapter 29 1. Suppose the Bank of England...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 29 1. Suppose the Bank of England purchases a UK government bond from you for £10,000. a. What is the name of the Bank’s action? Answer: Open market operations b. Suppose you deposit the £10,000 in First Student Bank. Show this transaction on First Student Bank's T-account. Answer: c. Suppose the reserve requirement is 20 percent. Show First Student Bank's T-account if they loan out as much as they can. Answer: d. At this point, how much money has been created from the Bank of England’s policy action? Answer: £10,000 + £8,000 = £18,000
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Practice Questions to accompany Mankiw & Taylor: Economics 2 e. What is the value of the money multiplier? Answer: 1/.20 = 5 f. After infinite rounds of depositing and lending, how much money could be created from the Bank of England's policy action? Answer: £10,000 x 5 = £50,000 g. If during the rounds of depositing and lending some people keep extra currency and fail to deposit all of their receipts, will there be more or
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This note was uploaded on 07/06/2009 for the course BUS BAM303 taught by Professor Na during the Spring '09 term at 東京大学.

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quanda29 - Chapter 29 1. Suppose the Bank of England...

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