{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

unit 8 assignment macroeconomics

unit 8 assignment macroeconomics - Macroeconomics 1 Brenda...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Macroeconomics 1 Brenda Russell BU204-02 Macroeconomics May 12, 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Macroeconomics 2 Macroeconomics Question: In Westlandia, the public holds 50% of M1 in the form of currency, and the required reserve ratio is 20%. Round Deposits Required reserves Excess reserves Loans Loan proceeds held as currency Loan proceeds deposited 1 $500.00 $100.00 $400.00 $400.00 $200.00 $200.00 2 $200.00 $40.00 $160.00 $160.00 $80.00 $80.00 3 $ 80.00 $16.00 $64.00 $64.00 $32.00 $32.00 4 $32.00 $6.40 $25.60 $25.60 $12.80 $12.80 5 $12.80 $2.56 $10.24 $10.24 $5.12 $5.12 6 $ 5.12 $1.02 $4.10 $4.10 $2.05 $2.05 7 $2.05 $0.41 $1.64 $4.10 $0.82 $0.82 8 $0.82 $0.16 $0.66 $0.66 $0.33 $0.33 9 $0.33 $0.07 $0.26 $0.26 $0.13 $0.13 10 $0.13 $0.03 $0.10 $0.10 $0.05 $0.05 totals $833.25 $166.65 $666.60 $666.60 $333.30 $333.33 1. Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table. (Hint: The first row shows that the bank must hold $100 in minimum reserves—20% of the $500 deposit—against this deposit, leaving $400 in excess reserves that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 × 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in round 1.)
Background image of page 2
Macroeconomics 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}