Question

In: Economics

1. Answer the following questions based on the functions of money Buying a new pillow on...

1. Answer the following questions based on the functions of money

Buying a new pillow on Amazon. (Medium of Exchange / Store of Value / Unit of Account )

Looking at the price tag for a new sweater. (Medium of Exchange / Store of Value / Unit of Account )

Saving cash to pay for a study abroad trip next semester. (Medium of Exchange / Store of Value / Unit of Account )

2.

a. ABC Bank has $460,000 of checkable deposits. If the Federal Reserve has a reserve requirement of 14 percent, what is the required reserves?

b. XYZ Bank has required reserves of $33,040 and excess reserves of $379,960, what is the amount of actual reserves?

3.

Suppose the Federal Reserve establishes a reserve requirement of 27 percent.

Instructions: Round answers two decimal places.

a. What is the monetary multiplier?

b. Using the money multiplier from part a, how much will the money supply change if checkable deposits increase by $600 million?

Expert Solution

( Since question number is not specified , I would answer the first question)

Before Answering the question , I would like to define all three functions.

Medium Of Exchange - An instrument which is used to facilitate sale, purchase or trade of goods and services between two parties.

Store Of Value - Its the function of an asset/instrument that can be saved , retrieved and exchanged at a later time and specifically that instrument/asset is predictably useful at time of exchange..

Unit Of Account - Unit by which value of things are accounted and measured.

now

Buying a new pillow at amazon

Here money is used to facilitate the purchase of pillow therefore MEDIUM OF EXCHANGE.

Looking at price tag for new sweater.

All the products are measured in one unit of account (say US Dollar) therefore UNIT OF ACCOUNT.

Saving cash for study abroad trip for next semester

Here money is saved for future purpose and cash will be specifically useful at the time of exchange , therefore STORE OF VALUE.

ALL THE BEST :)))

Rahul Sunny answered 1 year ago

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