University of Miami Economics Questions


Problem Set # 4 The commercial banks in Zapland haveSuppose that the reserve requirement for checking deposits is 10 percent and that banks do not hold any excess reserves.If the Fed sells $10,000 of government bonds, what is the effect on the economy’s reserves and money supply?Now suppose the Fed lowers the reserve requirement to 5%, but banks choose to hold another 5% of deposits as excess reserves. Why might banks do so?What is the overall change in the money multiplier and the money supply as a result of these actions?Which of the following is money? Reserves$250 Loans$1,000 Deposits$2,000 Total Assets$2,500 Construct the commercial banks’ balance sheet. If you are missing any assets call them “other assets”: if you are missing any liabilities, call them “other liabilities.”Calculate the banks reserve ratioIf banks hold no excess reserves, calculate the money multiplier. An American Express traveler’s check Checking deposits at Washington Mutual bank. The check you have just written to pay for school fees.

money supply

government bonds

Mutual bank

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