302fall11pp4ans UD-1

302fall11pp4ans UD-1 - UNIVERSITY OF DELAWARE DEPARTMENT OF...

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UNIVERSITY OF DELAWARE PROFESSOR DAVE WHARTON DEPARTMENT OF ECONOMICS FALL 2011 ECN 302 BANKING AND MONETARY POLICY PRACTICE PROBLEM SET 4: ANSWERS QUESTIONS AND PROBLEMS FROM THE TEXTBOOK: Chapter 14 - # 1, 2, 3, 5, 6, 8, 9, 10, 11, 13, 16, 17, 18, 19 & 20 (pp 370-371) 1. Reserves and the monetary base fall by $2 million, as the following T-accounts indicate: First National Bank Assets Liabilities Reserves ± Securities ² Federal Reserve System Assets Liabilities Securities ± $2 million Reserves ± $2 million 2. Bank Reserves do not change but the monetary base fall by $2 million, as the following T-accounts indicate: Irving the Investor Assets Liabilities Currency ± Securities ² Federal Reserve System Assets Liabilities Securities ± $2 million Currency ± $2 million
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ECON 302 ± PRACTICE PROBLEM SET 4: ANSWERS PAGE 2 3. Reserves and currency both increase by $50 million so the monetary base increase by $100 million, as the following T-accounts indicate: Banking System Assets Liabilities Reserves ± $50 million Discount Loans +$100 million Deposits -$50 million Non-Bank Public Assets Liabilities Deposits ² $50 million Currency +$50 million Federal Reserve System Assets Liabilities Discount Loans ± $100 million Reserves ± $50 million Currency + $50 million 5. If the Fed lends $1 million to First National, reserves of the Banking System increase by $1 million. Since
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This note was uploaded on 12/10/2011 for the course ECON 302 taught by Professor Abrams during the Fall '08 term at University of Delaware.

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302fall11pp4ans UD-1 - UNIVERSITY OF DELAWARE DEPARTMENT OF...

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