This preview shows page 1. Sign up to view the full content.
Unformatted text preview: The FED can always e²ect an expansion because: a. The FED can sell government securities at a loss b. The FED can verbally convince bank presidents to call in loans c. Banks may decide not to make new loans. d. False statement. The maximum money multiplier for this problem is: a. 5 b. 4 c. 2 d. 10 (3) (5 pts) Assume the FED’s transaction to expand the money supply is $50M and to maximize pro±ts the banks keep reserves down to the legal minimum and the required reserve ration is 20%. Given all action takes place in a single bank whose initial position is shown below. FILL IN THE BLANKS : BANK 1 Assets Liabilities R $100M DD $500M GS 200M L 200M Assets Liabilities R $ M DD $ M GS M L M Assets Liabilities R $ M DD $ M GS M L M BANK 1 Second Round Assets Liabilities R $ M DD $ M GS M L M Assets Liabilities R $ M DD $ M GS M L M Assets Liabilities R $ M DD $ M GS M L M WORK SPACE BELOW 5...
View Full Document
This note was uploaded on 12/05/2011 for the course M 341 taught by Professor Hietmann during the Spring '08 term at University of Texas.
- Spring '08