Question

In: Economics

Define the following: Fractional reserve system Required reserves Excess reserves Money (deposit) multiplier Portfolio investment Leverage...

Define the following:

Fractional reserve system

Required reserves

Excess reserves

Money (deposit) multiplier

Portfolio investment

Leverage

AS-AD model

Connection between AD function model and AS-AD model (i.e. change in a,b,Ip,G,T,r)

Inflation expectations

Supply shocks

Capacity

Wage-price spiral

Expert Solution

Rahul Sunny answered 1 year ago

Define the following Barter Liquidity Commodity money Fiat money Financial intermediary Bank reserves Fractional reserve system...

Define the following Barter Liquidity Commodity money Fiat money Financial intermediary Bank reserves Fractional reserve system Required reserves Excess reserves Money (deposit) multiplier Portfolio investment Leverage

Define money multiplier. what is the value of money multiplier in a system of 100% reserve...

Define money multiplier. what is the value of money multiplier in a system of 100% reserve banking? what is the value of money multiplier in a system of fractional reserve banking, if all money is held in the form of deposits? Why is the money multiplier higher under fractional banking than under 100% reserve banking?

A. Calculate the currency-to-deposit ratio (c), the excess-reserves-to-deposit ratio (e) and the money multiplier (m) given...

A. Calculate the currency-to-deposit ratio (c), the excess-reserves-to-deposit ratio (e) and the money multiplier (m) given the following values: rr = 0.20 C = $320 billion D = $1,000 billion ER = $60 billion B. Calculate total required reserves (RR), total actual reserves (AR) and the monetary base (MB). C. Now assume the FED lowers the required reserve ratio to 0.10. Calculate the new money multiplier (m’) and the new money supply (M1). D. Calculate the new level of deposits...

An increase in the reserve requirement A) increases the money supply by decreasing excess reserves and decreasing the monetary multiplier

An increase in the reserve requirement A) increases the money supply by decreasing excess reserves and decreasing the monetary multiplier B) decreases the money supply by increasing excess reserves and decreasing the monetary multiplier c) decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier D) increases the money supply by increasing excess reserves and increasing the monetary multiplierWhen the federal government cuts taxes and increases purchases to stimulate the economy during a period of recession, such actions are designed to...

Describe fractional reserve banking and how it leads to the money multiplier. Describe the meaning of...

Describe fractional reserve banking and how it leads to the money multiplier. Describe the meaning of and reconcile the relationship between the following two equations describing money multiplication: 1) k = RR/Deposits and 2) mm = M/H.

How can the Federal Reserve System create new excess reserves (or destroy existing excess reserves)? How...

How can the Federal Reserve System create new excess reserves (or destroy existing excess reserves)? How do the actions of the Federal Reserve alter economic conditions?

Using a required reserve ratio of 10% and if banks keep no excess reserves, which of...

Using a required reserve ratio of 10% and if banks keep no excess reserves, which of the following scenarios produces a larger increase in the money supply, explain why. a) Someone takes $1000 from under his or her mattress and deposits it into a checking account. b) The Fed purchases $1,000 in government securities from a commercial bank.

Calculate the money supply in case of Fractional reserve banking system. Pretend the Reserve Ratio is...

Calculate the money supply in case of Fractional reserve banking system. Pretend the Reserve Ratio is by 5%. Borrowers first withdrew the loan from 1st National Bank and deposited it in 2nd National Bank. Borrowers Took The Loan from 2nd National Bank and Deposited it in 3rd National Bank Then Borrowers withdrew finally the loan from 3rd National Bank and deposited it in 4th National Bank. Questions: a- Open a T Account for each Bank with the previous situations. b-Show...

Why are banks holding so many excess reserves and why is the money multiplier less than...

Why are banks holding so many excess reserves and why is the money multiplier less than one? (500 - 650 word explanation please!)

A. The banking system currently holds $20 billion in required reserves and zero excess reserves. The...

A. The banking system currently holds $20 billion in required reserves and zero excess reserves. The Fed lowers the required reserve ratio from 15 percent to 12.5 percent. Assuming that there are no cash leakages, the resulting change in checkable deposits (or the money supply) is approximately $2.7 billion. $1.5 billion. $2.0 billion. $12.5 billion. $26.6 billion. B. Which of the following Fed actions will decrease the money supply? an open market purchase of Treasury bills an increase in the...