4. complete the table which shows investment in the united states in billions of

Question

4. complete the table which shows investment in the united

states in billions of 2000 chained dollars

year 2005

gross domestic investment 1,873.5

depreciation 1,266.6

net private domestic investment ?

year 2006

gross domestic investnment ?

depreciation 1,2161

net priavte domestic investment 696.4

year 2007

gross domestic investment 1,809.7

depreciation ?

net priavate domestic investment 546.7

5. which of the following is part of M1 and M2

a. $0.27 that has accumulated under a couch cushion

b. your $2,000 line of credit with your visa account

c. $210 balance in your checking account

d. $417 in your savings account

e. 10 shares of the recently issued facebook stock that your

grandma gave you

f. $200 in travelers checks you purchased before your summer

trip to italy

6. suppose a banks balance sheet looks as follows:

assets

reservers

$2,700

property

$ 4,500

liabilities

deposits $7,200

and banks the reserve requirement is 20 percent

a. how much is excess reserves ratio 20 percent

b. how much can this bank lend

7. suppose a bank A with 25% reserve requirement has $50 million

in reserves and $200 million in checkable deposits one of the banks

depositors a major corporation writes a check to another

corporation for $5 million the check is deposited in another bank

(bank B)

a. explain how the withdrawl affects the banks reserves and

checkable deposits

b. by how much must bank A have to reduce lending?

8. assume the bank of america has access reserves of $30

milllion and outstanding transaction (checking) deposits of $180

million if the reserve ratio is 10% what is the size of the bank of

america total reserves?

9 banks fail when all depositors try to withdraw money at the

same time one way to prevent this problem would be to require bank

to hold 0 of deposits on hand

a. why would this not be desirable thing to do

b. what would happen to the banking system

c. explain how the law which requires banks to purchase fdic

insurance makes 100% reserve system unnecessary.

Explanation / Answer

1-

net private domestic investment = gross domestic investment 1,873.5 -depreciation 1,266.6= 606.

2

gross domestic investnment = net priavte domestic investment 696.4+depreciation 1,2161=12857.4

3

depreciation= gross domestic investment 1,809.7- net priavate domestic investment 546.7

------------------=263.0

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