Question 1

The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?

Accepted Answer

The answer of The Fed buys $50,000 of government securities...

Question 2

A bank has reserves of $50, deposits of $100, loans of $20, and government securities of $30. Assume the desired reserve ratio is 20 percent.
a)How much does the bank have in excess reserves?
b)What can the bank do with its excess reserves? Name two options.

Accepted Answer

The answer of A bank has reserves of $50, deposits...

Question 3

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of these assets and liabilities that is in M1?

Accepted Answer

The answer of The Second National Bank of Townville has...

Question 4

A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?

Accepted Answer

The answer of A bank receives new deposits equal to...

Question 5

-The above figure has the demand for money curve. Suppose the Fed initially sets the quantity of money equal to $0.6 trillion. Draw the supply of money curve in the figure. What is the equilibrium interest rate? Now suppose the Fed increases the quantity of money to $0.9 trillion. Draw the new supply curve. What is the new equilibrium interest rate?

Accepted Answer

The answer of 
-The above figure has the demand for...

Question 6

If a bank receives an additional deposit of $50,000 and the desired reserve ratio is 20 percent, what is the amount of new loans the bank can make?

Accepted Answer

The answer of If a bank receives an additional deposit...

Question 7

-The above table has the demand for money schedule.
a)If the Fed sets the quantity of money equal to $1.0 trillion, what is the equilibrium interest rate?
b)If the Fed wants the interest rate to be 4 percent, what must it do?

Accepted Answer

The answer of 
-The above table has the demand for...

Question 8

The Federal Reserve reports that it has coins valued at $10 billion, bank reserves at the Fed of $15 billion, gold valued at $10 billion, Federal Reserve notes of $400 billion, and U.S. government securities of $300 billion. What is the size of the monetary base?

Accepted Answer

The answer of The Federal Reserve reports that it has...

Question 9

Barter eliminates the double coincidence of wants.

Accepted Answer

Barter requires the double coincidence of wants, meaning each party must have what the other wants and be willing to trade for it.

Question 10

A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of excess reserves for this bank? Show your work.

Accepted Answer

The answer of A bank reports reserves of $100,000, government...

Question 11

The First National Bank of Townville has $125,000 in U.S. government securities, $200,000 in savings accounts, $300,000 in checking accounts, $50,000 in its reserve account at the Fed, $10,000 of currency in its vault, and loans of $250,000. What is the amount of its reserves?

Accepted Answer

The answer of The First National Bank of Townville has...

Question 12

A bank has checking deposits of $400, saving deposits of $900, time deposits of $900, loans of $950, government securities of $900, outstanding credit card balances of $400, currency in its vault of $40, and deposits in its reserve account at the Fed of $40.
a)What is the amount of this bank's deposits that are in M1?
b)What is the amount of this bank's deposits that are in M2?
c)What is the amount of this bank's reserves?

Accepted Answer

The answer of A bank has checking deposits of $400,...

Question 13

The quantity of money is $1 billion, the price level is 1.10, and real GDP is $10 billion. What is the velocity of circulation?

Accepted Answer

The answer of The quantity of money is $1 billion,...

Question 14

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a medium of exchange.

Accepted Answer

Money serves as a commonly accepted medium of exchange, allowing individuals to trade goods and services without requiring a direct match in desires between the two parties involved in the transaction. This eliminates the need for a double coincidence of wants, making transactions easier and more efficient.

Question 15

The Second National Bank of Townville has $400,000 in checking deposits, $125,000 in savings deposits, $500,000 in loans, $20,000 in its reserve account at the Fed, and $5,000 of currency in its vault. What is the amount of its reserves?

Accepted Answer

The answer of The Second National Bank of Townville has...

Question 16

When Patty uses money to buy her lunch, she is showing the use of money as a "store of value."

Accepted Answer

When Patty uses money to buy her lunch, she is showing the use of money as a "medium of exchange," not a "store of value."

Question 17

The money supply, as measured by M1, consists almost entirely of currency.

Accepted Answer

The money supply, as measured by M1, consists of currency plus demand deposits, traveler's checks, and other checkable deposits at banks.

Question 18

The desired reserve ratio is 10 percent. Fly By Night Bank has deposits of $250,000 and reserves of $25,000. What is the amount of its excess reserves?

Accepted Answer

The answer of The desired reserve ratio is 10 percent....

Question 19

Credit cards are not part of the nation's money supply.

Accepted Answer

Credit cards represent a form of borrowing and do not directly contribute to the supply of money in an economy. Instead, they allow for the transfer of existing money between individuals or entities.

Question 20

-The above table has the demand for money schedule.
a)If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b)Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part (a).

Accepted Answer