Problem Set 5
1)Â Â Â Â Â What are the three functions of money? Which function is the defining characteristic?
Â
2)Â Â Â Â Â How is the discount rate different from the federal funds rate?
Â
3)Â Â Â Â Â Consider the balance sheet for the Wahoo bank as presented below.
|
Wahoo Bank Balance Sheet
|
|
Assets
|
Liabilities
|
|
government securities
|
$1,600
|
Liabilities:Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Checking accounts
|
$4,000
|
|
Required Reserves
|
$400
|
Net Worth
|
$1,000
|
|
Excess Reserves
|
$0
|
Â
|
Â
|
|
Loans
|
$3,000
|
Â
|
Â
|
|
Total Assets
|
$5,000
|
Total Liabilities
|
$5,000
|
Â
Using a required reserve ratio of 10% and assuming that the bank keeps no excess reserves, write the changes to the balance sheet for each of the following scenarios:
a.      Bennett withdraws $200 from his checking account.
b.     Roland deposits $500 into his checking account.
c.      The Fed buys $1,000 in government securities from the bank.
d.     The Fed sells $1,500 in government securities to the bank.
Â
4) Using a required reserve ratio of 10% and assuming that 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.
Â
5) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, what is the value of government securities the Fed must purchase if it wants to increase the money supply by $2 million?
Â
Â
Â
Answers
Status NEW
Posted 02 May 2017 06:05 PM
My Price 12.00
ECO-----------N 2-----------14 -----------Pro-----------ble-----------m S-----------et -----------5EC-----------ON -----------214----------- Pr-----------obl-----------em -----------Set----------- 5E-----------CON----------- 21-----------4 P-----------rob-----------lem----------- Se-----------t 5-----------ECO-----------N 2-----------14 -----------Pro-----------ble-----------m S-----------et -----------5-----------
Attachments
file 1493751928-Problem 5 Solution.docx preview (564 words )
P-----------rob-----------lem----------- Se-----------t 5----------- W-----------hat----------- ar-----------e t-----------he -----------thr-----------ee -----------fun-----------cti-----------ons----------- of----------- mo-----------ney-----------? W-----------hic-----------h f-----------unc-----------tio-----------n i-----------s t-----------he -----------def-----------ini-----------ng -----------cha-----------rac-----------ter-----------ist-----------ic?----------- A-----------nsw-----------er.----------- 1------------Me-----------diu-----------m o-----------f e-----------xch-----------ang-----------e (-----------whi-----------ch -----------is -----------the----------- de-----------fin-----------ing----------- an-----------d m-----------ost----------- im-----------por-----------tan-----------t f-----------unc-----------tio-----------n) ----------- 2------------A u-----------nit----------- of----------- ac-----------cou-----------nt -----------–-----------mea-----------sur-----------e i-----------n w-----------hic-----------h p-----------ric-----------es -----------are----------- qu-----------ote-----------d -----------3-S-----------tor-----------e o-----------f v-----------alu-----------e-h-----------old-----------ing----------- we-----------alt-----------h -----------How----------- is----------- th-----------e d-----------isc-----------oun-----------t r-----------ate----------- di-----------ffe-----------ren-----------t f-----------rom----------- th-----------e f-----------ede-----------ral----------- fu-----------nds----------- ra-----------te?----------- A-----------nsw-----------er.----------- Th-----------e f-----------edr-----------al -----------fun-----------ds -----------rat-----------e i-----------nvo-----------lve-----------s t-----------he -----------int-----------ere-----------st -----------rat-----------e a-----------t w-----------hic-----------h b-----------ank-----------s w-----------ith----------- ex-----------ces-----------s r-----------ese-----------rve-----------s
Not Rated(0)