Chapter 14 and 15

$501 billion $600 billion - $300 billion - $130 billion = $170 billion $300 billion x (100% - 20%) = $240 billion $130 billion x (100% - 30%) = $91 billion $170 billion + $240 billion + $91 billion = $501 billion

Assume that the equilibrium aggregate demand is $⁢600 billion and that $⁢300 billion of it is consumption spending and $⁢130 billion is investment spending. The Fed conducts a contractionary monetary policy; as a result, the equilibrium interest rate changes from 8% to 11%, which in turn affects consumption spending and investment spending. If we compare consumption spending and investment spending at the new equilibrium point with their values at the initial equilibrium point, the difference is 20% and 30%, respectively (both components have changed in the same direction). If other components of aggregate demand are the same for the two equilibrium points, determine the level of aggregate demand that corresponds to the new equilibrium point. Round to the nearest whole number. Enter your answer in billions in the box below.

5.5% 11% / 2.0 = 5.5%

Assume that there is a market for loanable bank funds where the equilibrium occurs at a 11% interest rate and a quantity of funds loaned and borrowed is $⁢31 billion. The Fed pursues an expansionary monetary policy, and as a result, the interest rate changes by 2.0 times and the quantity of loaned funds changes by 1.2 times.Determine the interest rate at which the new equilibrium occurs. Round to one decimal place. Enter your answer in the box below.

6.6% 3% x 2.2 = 6.6%

Assume that there is a market for loanable bank funds where the equilibrium occurs at a 3% interest rate and a quantity of funds loaned and borrowed is $⁢15 billion. The Fed pursues a contractionary monetary policy, and as a result, the interest rate changes by 2.2 times and the quantity of loaned funds changes by 1.5 times. Determine the interest rate at which the new equilibrium occurs.

$14.00 billion $90 billion + $140 billion = $230 billion 0.8 x $55 = $44.00 $150 billion + $44.00 billion + $50 billion = $244.00 billion $244.00 billion - $230 billion = $14.00 billion

A bank holds $⁢90 billion in checking accounts, $⁢140 billion in savings account, and $⁢50 billion in reserves. The bank has also issued loans for $⁢150 billion and purchased 0.8 billion bonds, each worth $⁢55.Calculate the bank's net worth. Throughout your calculations, round to two decimal places if necessary. Enter your answer in billions in the box below.

$140 billion $3,100 billion - $200 billion + $340 billion = $3,240 billion $3,240 billion - $3,100 billion = $140 billion

An economy's M2 money supply was $⁢3,100 billion in 2015. In 2020, M1 money supply in this economy decreased by $⁢200 billion, while the value of savings accounts increased by $⁢340 billion.Calculate the difference in M2 between 2015 and 2020. Enter your answer in billions and as a positive number in the box below.

$519 billion $410 billion - $180 billion - $110 billion = $120 billion 15%-13% = 2 percentage points $180 billion x (100% + (15%x2)) = $234 billion $110 billion x (100% + 13% x2) = $165 billion $120 billion + $234 billion + $165 billion = $519 billion

Assume that aggregate demand is $⁢410 billion and that $⁢180 billion of it is consumption spending and $⁢110 billion is investment spending. The Fed conducts an expansionary monetary policy and changes the interest rate from 15% to 13%. Assume that every 11 percentage point change in interest rate results in a 15% change in consumption spending and a 25% change in investment spending. Other components of aggregate demand are the same at the initial and new equilibrium points.Determine the level of output that corresponds to the new equilibrium point given the expansionary monetary policy. Both consumption and investment spending change in the same direction. Round to the nearest whole number and enter your answer in billions in the box below.

$3,000 billion $80,000 billion / 4.0 = $20,000 billion $80,000 billion x (100% + 15%) = $92,000 billion $92,000 billion/ 4.0 = $23,000 billion $23,000 billion - $20,000 billion = $3,000 billion

Assume that in 2017 nominal GDP was $⁢80,000 billion and the velocity of money was 4.0. In 2018, the government wanted to increase nominal GDP by 15%. Assuming that the velocity of money does not change, determine the change in money supply required to implement the discussed change in nominal GDP. Enter your answer in billions in the box below.

22% (100% + 37%) x (100% - 4%) / 100%+8% = 22%

Assume that in 2018 the central bank conducted a monetary stimulus. As a result, the money supply increased by 37%, and the quantity of goods and services produced increased by 8%; the velocity of money decreased by 4%. Determine the percentage change in the price level of money in this economy in 2018. Enter your answer as a positive number in the box below and round to the nearest whole number if necessary.

16.7% 1 / X x $640 x (1-X) = $3,245 billion x = 16.7

Consider an economy with multiple banks. Customers deposited $⁢650 billion in cash in banks. As a result, the M1 money supply increased by $⁢3,245 billion.Calculate the reserve requirement set by the central bank for commercial banks if all excess reserves are loaned out. Enter your answer as a percentage in the box below and round to one decimal place if necessary.

$336 billion 1/ reserve requirement 1/2 x 100 = 50% $168 billion/ 50% = $336 billion

Consider an economy with multiple banks. The dollar value of the required reserves is $⁢168 billion. Calculate the total value of customers' deposits if the money multiplier in the economy equals 2. In your calculations, round to one decimal place if necessary, and enter your answer in billions in the box below.

B

Fill in the blank with the correct function of money. Select the best answer. Money serves as a [blank], which means that it is a measure of market value in the economy. A. Medium of exchange B. Unit of account C. Basis of credit

B

Fill in the blank with the correct term. Select the best answer. [Blank] is used as money but also has a value from its use as something other than money. A. Commercial bank money B. Commodity money C. Fiat Money

$6,450 $510 + $9,100 = $9,610 $9,100 - $6,450= $2,650 $510 + $2,650= $3,160 $9,610 - $3,160 = $6,450

Hassan has $⁢510 in cash and $⁢9,100 in his checking account. He decides to open a savings account, transfer $⁢6,450 into it from his checking account, and withdraw the rest of the money in the checking account as cash.Calculate the difference in M1 before and after Hassan's banking decisions. Enter your answer as a positive number in the box below.

$300 billion $400 billion + $150 billion = $550 billion $150 billion + $60 billion = $210 billion $550 billion - $40 billion = $510 billion $510 billion - $210 billion = $300 billion

In 2015, the net worth of a bank was $⁢400 billion, and the bank's liabilities were $⁢150 billion. In 2020, the value of customers' deposits in the bank increased by $⁢60 billion, and reserves decreased by $⁢40 billion.Calculate the net worth of the bank in 2020 if other parameters remained constant. Enter your answer in billions and as a positive number in the box below.

C

Lesson 14 1: Which statement is correct about functions for money? A. In a modern economy, money is the only existing store of value. B. Using money does not eliminate the double coincidence of wants problem; therefore, trade between parties limited in an economy that uses money. C. Price tags on goods in a shop illustrate the unit of account function of money, which allows us to measure the value of these goods in terms of money

$905 billion M2-M1 = $665 billion + $105 billion + $135 billion = $905 billion

Lesson 14.2: Below are the components of the money supply in an economy and their values: Coins and currency in circulation: $570 billion Demand deposits and other checking accounts: $880 billion Individual money market mutual fund balances: $⁢135 billion Savings deposits: $⁢665 billion Time deposits: $⁢105 billion Traveler's checks: $⁢13 billion Determine the difference between the M1 and M2 money supply. Enter your answer in billions and as a positive number in the box below.

$355 billion $700 billion + $400 billion + $1,100 billion $700 billion + $155 billion = $855 billion $400 billion + $200 billion + $600 billion $855 billion + $600 billion = $1,455 billion $1,455 billion - $1,100 billion = $355 billion

Lesson 14.3: In 2014, the net worth of a bank was $⁢700 billion, and the value of customers' deposits was $⁢400 billion. In 2019, the net worth of the bank increased by $⁢155 billion, and the value of savings accounts increased by $⁢200 billion.Calculate the difference in the bank's total assets between 2014 and 2019. Enter your answer in billions and as a positive number in the box below.

2.9 $210 billion / $600 billion x 100 = 35% 1 / 35% = 2.9

Lesson 14.4: Consider a system with multiple banks. Customers deposited $⁢600 billion in a bank, and the bank was required by the central bank to keep $⁢210 billion in reserves.Calculate the money multiplier for this economy. Assume that all excess reserves are loaned out. Enter your answer as a decimal number in the box below and round to one decimal place if necessary.

C

Lesson 15.1 Which statement is correct? Select the best answer. A. The Fed is a common name for central banks in North American countries and England B. The Federal Reserve provides banking services only to the federal government. C. The Fed is responsible for check processing.

$145 million $180 million - $35 million = $145 million

Lesson 15.3 Assets (in millions) Liabilities and net worth Reserves $90 Deposits $650 Bonds $180 Loans $450 Net worth $70 The central bank decides to expand the money supply by $⁢35 million using Bank A's bonds. What is the value of the bonds in Bank A after this action? Enter your answer in millions in the box below.

7.33 $7,200 billion x 8 = $57,600 billion $57,600 x (100% + 10%)= $63,360 billion $7,200 billion x (100% + 20%) = $8,640 billion $63,360 billion/ $8640 billion = 7.33

Lesson 15.5 Assume that in 2017 the money supply was $⁢7,200 billion and the velocity of money was 8. Knowing that in 2018 the money supply increased by 20% and the nominal GDP increased by 10%, determine the velocity of money in this 2018 economy. Enter your answer in the box below and round to two decimal places if necessary.

A

Which Statement is correct? A. There are central banks or similar structures in most countries in the world B. A central bank does not usually influence macroeconomic policy although it is responsible for check processing.

B

Which statement is correct about the barter system and a double coincidence of wants? Select the best answer. A. A double coincidence of wants is an essential condition for an exchange between two people in an economy that uses money. B. One of the problems of a barter system is that it keeps economies that use it from growing. C. Trading a good or service for money, without any bank operations involved, is a common for a barter system.

B

Which statement is correct? Select the best answer. A. Commercial banks in each district elect a Board of Directors for each regional Federal Reserve bank, but all of these boards are headed by the chair of the fed. B. The fed includes twelve regional federal reserve banks, each with its own district. C. The federal reserves system includes only federally appointed leaders.

B

Which statement is correct? Select the best answer. A. Like most central banks, the Federal Reserve is decentralized B. Appointments to the Board of Governors are for fourteen-year terms in order to provide policy C. The U.S. president does not only appoint the members of the Board of Governors but can also ask for a board member to resign

A

Which statement is correct? Select the best answer. A. The fed can be considered as a "bank for banks" B. The most commonly used tool of monetary policy for the fed and for most central banks is changing the discount rate. C. The fed was given the power "to regulate the value of money" by Article I, section 8 of the U.S. Constitution, but the power "to coin money" was reserved by congress.

A

Which statement is correct? Select the best answer. A. The powers "to coin money" and "to regulate the value thereof" were delegated to the Fed by congress B. The most commonly used tool of monetary policy for the fed and for most central banks is changing the discount rate C. There are four traditional tools used by fed to implement monetary policy in the economy

C

Which statement is correct? Select the best answer. A. The specific interest rate targeted in open market operations can be either short- or long-term, depending on market condition. B. The FOMC makes the decisions regarding reserve requirement changes. C. In practice, the Fed rarely uses large changes in reserve requirements to execute monetary policy. D. The discount rate is the percentage of each bank's deposits that is legally required to hold either as cash in their vault or on deposit with the central bank.

D

Which statement is correct? select the best answer A. The Fed charges a lower discount rate than the federal funds rate. B. According to the monetary policy of reserve requirements, if banks are required to hold a greater amount in reserves as reserve requirements, they will have a greater amount of money available to lend out. C. The specific interest rate targeted in open market operation can be either short- or long-term, depending on market conditions. D. If the central bank rises the discount rate, the money supply falls.

A

which statement is correct about functions for money? Select the best answer. A. Exchanging an apartment in the city for money and then using this money to buy a house in a village instead of a direct B. One function of money is that it must serve as a standard of deferred payment, that is, act as C. In a modern economy, saving money is the most reliable way of storing value, as the value of money remains unchanged