# B a bank makes a 20000 loan to a business answer

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b.A bank makes a \$20,000 loan to a business.
c.A consumer withdraws \$100 from his/her checking account.
11.Reserves/Money: Use the information below to calculate the answers to parts a – e. _______________________________________ Borrowed reserves \$25 Currency-to-deposit ratio 0.25 Excess reserves \$70 Nonborrowed reserves \$1,445 Required reserves ratio 0.10 a.Total reserves.
b.Required reserves.
c.Checking deposits. Answer Required reserves = Required reserves ratio×Checking deposits \$1,400 = 0.10×Checking deposits Checking deposits = \$14,000 d.Currency. Answer Currency = Currency-to-deposit ratio×Checking deposits Currency = 0.25×\$14,000 Currency = \$3,500 e. M1. Answer M1 = Currency + Checking deposits M1 = 3,500 + \$14,000 M1 = \$17,500 12.The Money Multiplier: Suppose the currency-to-deposit ratio is 0.20, the excess reserves-to-deposit ratio is 0.10, and the required reserves ratio is 0.10. a.If the Federal Reserve buys \$6 million in bonds, how much does the money supply change?
b.If the Federal Reserve wants the money supply to decline by \$27 million, how much should it decrease the monetary base?
15.The Taylor Rule: Suppose the Federal Reserve targets the unemployment rate gap as opposed to the output gap. Use Okun’s Law and the Taylor Rule to derive the relationship between the nominal interest rate and the unemployment rate. Does the nominal interest rate target rise or fall when the unemployment rate increases?
16.Government Deficit/Debt: Suppose the debt (D) is 12,000, the nominal interest rate (R) is 0.04, government spending is 520, actual output (Y) is 4,800, potential output (Y*) is 5,000, transfer payments (F) equal 300 – 0.2×(Y – Y*), and taxes (T) equal 0.25×Y. a.Find the size of the actual budget deficit.
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