# Scenario d now the chair is not pleased with your

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10.Scenario D:Now the Chair is not pleased with your work, and calls again. Assuming that the money multiplier is now stable (i.e., the value you found in #8), you need to figure out what to do, in terms of open market operations, to hit the 33.33 percent money growth rate desired by the chair and the FOMC. To do this you mustfirst identify the target money supply. Then you will be able to calculate the needed monetary base and finally you will be able to calculate the amount of open market purchases/sales. Work through these steps in #10 – 12.
Your goal is to increase the money supply by 33.33%. Use the Money supply you found in #9 and increase it by33.33%, then round to the nearest whole number. The target money supply is:
Feedback: IDENTIFY THE TARGET MONEY SUPPLY, CALL IT M* = (4/3) x 2400 = 3200 = M*Table for Individual Question FeedbackPoints Earned:3.0/3.0
11.The money multiplier is stable at the value you found in #8. Use it and your answer from #10 to calculate the appropriate monetary base. Round to the nearest whole number.
Feedback:FEEDBACK: WE KNOW THE MONEY MULTIPLIER IS STABLE AT 2.2642 = MM SO THE ONLY UNKNOWN IS THE APPROPRIATE MONETARY BASE (CALL IT MB*) AND THAT IS CONVENIENT SINCE YOU CAN INFLUENCE THE MB THROUGH OPEN MARKET OPERATIONS3200 = 2.2642 X MB*MB* = 1413.302Table for Individual Question FeedbackPoints Earned:4.0/4.0
12.NOTE: no graphing was required for Part 1. However you should be comfortable graphing the monetary base graph and the money supply graph for part 1. These graphs will be shown in the solutions so that you cancheck your understanding.An open market _______of ______ must occur to reach the monetary base found in #11 above (hint: take your answer from #11 and subtract your answer from #7).