{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

m_quiz6_2010_ans

# m_quiz6_2010_ans - QUIZ 6 Macro Winter 2010 Name Section...

This preview shows pages 1–2. Sign up to view the full content.

QUIZ 6: Macro – Winter 2010 Name: ______________________ Section Registered Campus Evening Question 1 (10 points) In this question, we will explore the link between the banking system and the aggregate money supply in the economy. Given the assumptions below, you should answer the subsequent parts to this question. All answers are numbers. Lastly, throughout the problem, assume the bank can adjust total loans (TL) freely (i.e., they can make new loans and call in old loans at will). This means total loans need not be fixed! Put your answer in the box . No work need be shown. All answers will be either awarded full credit (3 or 4 points) or no credit (0 points). There is little (if any) math that needs to be done to answer these questions. Most of the questions can be answered with simple intuition or simple arithmetic (adding, multiplying, etc.). Calculators are allowed (but you shouldn’t need them). Baseline assumptions : 1. The required reserve ratio ( m) equals 8.0%. 2. Banks only hold required reserves ( m* = m ). 3. No one in the economy holds cash outside the banking system ( TC = 0). 4. Total deposits in the entire banking system equals \$1.25 trillion ( TD = \$1.25 trillion). a. Given the baseline assumptions, what is the monetary base ( Base ) in this economy? (3 points) Monetary Base = TR + TC (money in the banks plus money in our pockets) TR = m * TD = 0.08 * 1.25 trillion = 0.1 trillion (\$100 billion) TC = 0 (by assumption) Base = \$0.1 trillion (or \$100 billion) b.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern