first fill in the blank answer options are (smaller, larger) 2nd fill in the bla
ID: 1110669 • Letter: F
Question
first fill in the blank answer options are (smaller, larger)
2nd fill in the blank answer options are (buy, sell)
3rd fill in the blank answer options are (rise, fall)
4th fill in the blank answer options are (1,2.5,4,5,10)
5th fill in the blank answer options are (buy, sell)
8. The reserve requirement, open market operations, and the moneysupply Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $300. Determine the money multiplier and the money supply for each reserve requirement listed in the following table Reserve Requirement (Percent) 20 10 Money Supply Simple Money Multiplier(Dollars) 1,500 3,000 5 10 A higher reserve requirement is associated with a smaller money supply Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to of U.S. government bonds. worth Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the money multiplier to government bonds in order to increase the money supply by $200. tO . Under these conditions, the Fed would need to worth of U.S Which of the following statements help to explain why, in the real world, the Fed cannot precisely control the money supply? Check all that apply. The Fed cannot control the amount of money that households choose to hold as currency The Fed cannot control whether and to what extent banks hold excess reserves. The Fed cannot prevent banks from lending out required reserves.Explanation / Answer
1) smaller
2) buy
3) $ 20 worth of securities
4) decrease
5) 4
Initial multiplier = 1/0.10 = 10
New multiplier = 1/0.25 = 4
6) Buy
7) $ 50 woth of US securities
Because 50 x new multiplier = 50 x 4 creates money supply of $ 200.
8) The Fed cannot control the amount of money the households choose to hold as currency.
The Fed cannot control whether and to what extent banks hold excess reserves.
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