b George never defaulted on his credit card before and as a reward Chase Credit

B george never defaulted on his credit card before

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(b) George never defaulted on his credit card before and as a reward, Chase Credit Card Service increases his credit line by \$1,000. What’s immediate change to M1 and M2 due to this credit line increase? Neither M1 nor M2 will change, since credit line is not part of M1 or M2. (c) Nathan woke up this morning and transferred \$800 from his saving account to his checking account. M1 will increase by \$800, M2 will not change. Saving account balance is part of M2 but not M1, Checking account balance is both part of M1 and M2.
Econ 1015 Worksheet: The Fed, Monetary & Fiscal Policy Dr. Myoung Lee University of Missouri-Columbia 6. Suppose there is a bank panic. Which of the following would not be a consequence of this bank panic? (1) Bank total reserves would decrease. (2) Required reserves would increase. (3) Bank checking account balances would decrease. (4) Individual banks would have to shrink the value of loans they made. (5) The economy would likely enter into a recession. 7. The economy of MacroLand is characterized by: Money Supply=\$15 trillion, Velocity =8, Real GDP(Y)=6 trillion. (a) Calculate the value of Price Level (P) and the Nominal GDP of MacroLand. Nominal GDP = M V = 15T 8 = \$120 trillion M V=P Y \$15 T x 8 = P x 6 T P =20 (b) Scenario 1: Suppose the Central Bank of MacroLand increases the money supply by 20%, and the velocity remains at 8.If real GDP remains constant, what will happen to price level? Level when the Money Supply increases by 20%? 8. Suppose required reserve ratio is 20% and Bank of Somewhere has a total of \$40 million in deposits, of which \$20 million were loaned out and the rest kept as reserves. You must show your work to get any credit .

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• Spring '08
• MyoungLee

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