Question

the Fed decides to stimulate the economy by increasing monetary circulation. How much should the Fed...

the Fed decides to stimulate the economy by increasing monetary circulation. How much should the Fed change the reserve requirement ratio (r) to increase the current multiplier coefficient from 7 to 15 in the next period? Find the difference between r1 and r0.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Multiplier Coefficient is related to Reserve Requirement Ratio as:

Multiplier Coefficient= 1/(Reserve Requirement Ratio)

This means that If Reserve Requirement Ratio is 10%, Banks can lend 90% of its deposits and money supply should be 10 times the reserves.

Given current multiplier coefficient is 7. So, Reserve Requirement Ratio= 1/(Multiplier Coefficient)= 1/7= 14.29%

Multiplier Coefficient in next period is 15. So Reserve Requirement Ration next period is 1/15= 6.67%

Change is 14.29%-6.67%= 7.62%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1) If the fed was concerned with inflation, it should? a) buy bonds and raise the...
1) If the fed was concerned with inflation, it should? a) buy bonds and raise the discount rate b) sell bonds and raise the discount rate c)sell bonds and lower the discount rate 2) If there are only two countries in the world and one has a trade deficit, the other country must? a) Also have a trade deficit b) Have a trade surplus c) Have trade restrictions in place 3) Goods and Services purchased from foreign sources are known...
Consider the current situation with the coronavirus outbreak. a. What do you think is the overall...
Consider the current situation with the coronavirus outbreak. a. What do you think is the overall effect on the economy? (Hint: what are we afraid of happening to the economy?) b. What should the Fed do (as it has done) in this situation? Describe the type of monetary policy, the steps the Fed takes, and the consequences (linking each factor to the next). c. Graph the money market before and after the change. Make sure you: label the axes, the...
On March 15, 2020, the U.S. Federal Reserve (the Fed) decided to further support the economy....
On March 15, 2020, the U.S. Federal Reserve (the Fed) decided to further support the economy. The Fed decided on expansionary monetary policy involving change interest rates (on savings and on loans). On March, 23, the Fed decided to purchase additional types of securities (in addition to the government securities that the Fed typically purchases when pursuing expansionary monetary policy). These additional purchases will put downward pressure on the interest rates on business loans and real estate loans (mortgages). The...
1) If the stock market crashes, then aggregate demand increases, which the Fed could offset by...
1) If the stock market crashes, then aggregate demand increases, which the Fed could offset by increasing the money supply. aggregate demand increases, which the Fed could offset by decreasing the money supply. aggregate demand decreases, which the Fed could offset by increasing the money supply. aggregate demand decreases, which the Fed could offset by decreasing the money supply. 2) In order to avoid entering a recession, the government of Batavia spent $300 billion improving infrastructure around the country. Assuming...
1. The most commonly used tool of monetary policy in the U.S. is the reserve requirement...
1. The most commonly used tool of monetary policy in the U.S. is the reserve requirement commercial banks must keep on hand at the Fed. TRUE/FALSE? 2. Open market operations take place when the central bank sells or buys U.S. Treasury bonds in order to influence the quantity of bank reserves and the level of interest rates. The specific interest rate targeted in open market operations is the discount rate.  TRUE/FALSE? 3. The Federal Reserve System is run by the government,...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a balanced budget B. maximum​ employment, stable​ prices, and moderate​ long-term interest rates C. a stable U.S. dollar on foreign exchange markets and moderate​ long-term and​ short-term interest rates D. an economic environment in which investment in U.S. stock and money markets is encouraged The Federal Reserve Act says that the Fed must use​ ______ to achieve its objectives. A. bank reserves B. commercial banks...
Whatever It Takes: How the Fed Aims to Rescue the Economy The central bank is using...
Whatever It Takes: How the Fed Aims to Rescue the Economy The central bank is using tactics from the last financial crisis and deploying new ones to keep money flowing. Here are the basics. The Federal Reserve, under Jerome H. Powell, is moving to shore up the American economy during the coronavirus pandemic. Credit...Yuri Gripas/Reuters By Ben Casselman March 23, 2020 The Federal Reserve on Monday pledged to do, in essence, whatever it takes to keep the economy from collapsing...
1. ​(Please refer to the attached exhibits and sample article​ ). Which paragraph would be best...
1. ​(Please refer to the attached exhibits and sample article​ ). Which paragraph would be best for a target audience of people familiar with economics in general and the workings of the Fed in​ particular? 2. (Please refer to the attached exhibits and sample article​ ). Which paragraph would be best for a target audience of people unfamiliar with​ economics? 3. ​(Please refer to the attached exhibits and sample article​ ). Which exhibits are the most ​accurate? 4. If the...
51. Which statement about the Federal Open Market Committee is untrue? (a) the Secretary of Treasury...
51. Which statement about the Federal Open Market Committee is untrue? (a) the Secretary of Treasury always is a voting member of the Committee on monetary policy decisions; (b) the President of the New York Fed, by tradition, always is a voting member on policy matters; (c) the Committee formulates, but does not implement, monetary policy; (d) its policy decisions do not require a consensus among voting members. 52. An open market operation designed to add reserves to the banking...
Which one of the following statements is true? Select one: a. Traditional Keynesian analysis indicates that...
Which one of the following statements is true? Select one: a. Traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes. b. According to Keynesians, fiscal policy is the first line of defense against economic downturns. c. Advocates of sacrifice ration claim that a zero-inflation target imposes only small costs on society. d. Sacrifice ration implies that a credible commitment to reducing inflation can lower the costs of disinflation by inducing a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT