exam3_2003

exam3_2003 - Essay Section - Exam 3 - ECON 51 Spring 2003...

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Essay Section - Exam 3 - ECON 51 – Spring 2003 1) Briefly outline the structural features of the Federal Reserve that influence the focus of monetary policy and relate them to the priorities, time horizon and objectives of monetary policy. (for full credit you must address all bolded elements). 2) Consider the following bank’s balance sheet in a banking system with a required reserve ratio of 20% Assets Liabilities Cash: $5000 Demand deposits: $50000 Deposits with the Fed: $15000 Loans : $20000 Securities: $10000 a) What are the legal, required and excess (if any) reserves? b) If Tom Jones withdraws $10000 to fund his next adventure what does the bank balance sheet look like? I. Does the money supply shrink? Explain II. Starting from the initial balance sheet, if he withdraws $30000 and leaves the country to start his travels, work through the impact on the bank’s balance sheet (be sure your liquidation priorities are consistent with those an actual bank would use). Does the money supply shrink? How do you know?
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This note was uploaded on 05/22/2010 for the course ECON 51 taught by Professor Leachman during the Fall '08 term at Duke.

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exam3_2003 - Essay Section - Exam 3 - ECON 51 Spring 2003...

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