HW 8 Fall 2010 - Eric Schneck Brigham Young University...

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Eric Schneck Brigham Young University Institute of Business Management ManEc 453 Problem Set #8 Due: November 30, 2010 1. Define the money multiplier (m) : The ratio between the quantity of money and the monetary base; the quantity of money (M) equals the money multiplier (m) times the monetary base. M = m × MB. 2. "If reserve requirments were set at zero for checkable deposits, the amount of multiple deposit creation would go on indefinitely". True, false or uncertain. TRUE 3. During the Great Depression, the excess reserve ratio rose dramatically. What do you think happened to the money supply? if you increase the reserve ratio it decreases the money multiplier which decreases the money supply. 4. Define the following reserve aggregates and, using the latest data from the federalreserve.gov web site, give the latest data: Data Aggregate Definition 1033047m Total Reserves The amount of reserves that FED holds for all other 66816m Required Reserves Reserves that a bank must hold to meet the requirements set by regulators. In the United States, the requirements
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