(solve in excel) Given the following, calculate the M1 money multiplier using th
ID: 2749945 • Letter: #
Question
(solve in excel)
Given the following, calculate the M1 money multiplier using the formula m1 = 1 + (C/D)/[rr + (ER/D) + (C/D)].
Once you have m, plug it into the formula MS = m × MB. So if m1 = 2.6316 and the monetary base increases by $100,000, the money supply will increase by $263,160. If m1 = 4.5 and MB decreases by $1 million, the money supply will decrease by $4.5 million, and so forth. Practice this in Exercise 2.
Calculate the change in the money supply given the following:
Currency Deposits Excess Reserves Required Reserve Ratio Answer: m1 100 100 10 .1 1.67 100 100 10 .2 1.54 100 1,000 10 .2 3.55 1,000 100 10 .2 1.07 1,000 100 50 .2 1.02 100 1,000 50 .2 3.14 100 1,000 0 1 1Explanation / Answer
Currency Deposits Excess Reserves Required Reserve Ratio Currency/ Deposits (C/D) Excess Reserves/Deposits(ER/D) Calculation of m1 m1 = 1 + (C/D)/[rr + (ER/D) + (C/D)]. 100 100 10 0.1 1 0.1 (1+F3)/(E3+F3+G3) 1.67 100 100 10 0.2 1 0.1 (1+F4)/(E4+F4+G4) 1.54 100 1,000 10 0.2 0.1 0.01 (1+F5)/(E5+F5+G5) 3.55 1,000 100 10 0.2 10 0.1 (1+F6)/(E6+F6+G6) 1.07 1,000 100 50 0.2 10 0.5 (1+F7)/(E7+F7+G7) 1.03 100 1,000 50 0.2 0.1 0.05 (1+F8)/(E8+F8+G8) 3.14 100 1,000 0 1 0.1 0 (1+F9)/(E9+F9+G9) 1.00 Change in MB m1 Change in MS Calculation 100 2 200 C13*B13 100 4 400 C14*B14 -100 2 -200 C15*B15 -100 4 -400 C16*B16 1,000 2 2000 C17*B17 -1000 2 -2000 C18*B18 10,000 1 10000 C19*B19 -10000 1 -10000 C20*B20
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