c. In a., after all rounds, how much additional money will have been created? d.

Question

c. In a., after all rounds, how much additional money will have been created? d. In a., what is the value of the "money multiplier"? e. Now repeat a., but assume that only 80% of the value of the bank loans is redeposited in the banking system (i.e. there is cash drainage) f. In e., after three rounds, howlmuch additional money is there in the economy? g. In e., after all rounds, how much additional money will have been created? (Hard.J h. In e., what is the value of the money multiplier? [Follows straightforwardly fromg.1 2. More on Money Creation Indicate which of the following statements are true and which are false; if false, explain why. If the reserve ratio of a bank falls below the level required by the Fed, it may borrow cash from the Fed at the reigning discount rate. a. b. The purchase of government securities (i.e. bonds and bills) from the public by the Fed will begin a contraction in commercial bank credit. If money is to remain generally acceptable as a medium of exchange, and to act as a unit of account and store of value, then it must consist of something that is useful and desirable for its own sake. c. d. If a bank is loaned up (i.e. has no excess reserves above the legal minimum), this means its loans equal its deposits. The demand for money will be higher when incomes are higher, and will be lower when interest rates are e. lower. f. Inflation always benefits debtors and hurts creditors g. Nobody gains when pure, perfectly anticipated inflation occurs But nobody loses either 3. Inflation across countries The file IrlUKinflation.xlsx has information on the CPI inflation rates for Ireland and the UK from 1961 through a. Graph both series on the same diagram. Be sure the labels on the horizontal axis show years hotween the patterns of inflation in the two countries prior to, and then after

Explanation / Answer

a) True

Because FED is lender of last resort for commercial banks as they always strive to keep solvency if commercial banks.

b) True

Because if FED purchases government securities from public , they will have enough money . They will no longer require any loan from commercial banks and hence this action will begin contraction in commercial bank’s credit.

As nothing is mentioned , expert has answered two questions.

Thank you .

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