Lumen OHM Assessment

Suppose that the required reserve ratio (R) is 50 percent and that banks do not hold any excess reserves.

What is money multiplier, given this situation?

Hint

Suppose that the Fed conducts a $360 million open market purchase of government bonds.

In addition, suppose that the required reserve ratio is 19 percent and that banks do not hold any excess reserves.

What is the effect on the money supply? More precisely, by how much will the money supply increase?

Hint

Suppose that the Fed sell $240 million of government bonds.

In addition, suppose that the required reserve ratio (R) is 41 percent and that banks do not hold any excess reserves.

What is money multiplier?

Hint

Suppose that the Fed sells $310 million of government bonds.

In addition, suppose that the required reserve ratio is 21 percent and that banks do not hold any excess reserves.

What is the effect on the money supply? More precisely, by how much will the money supply change?

Hint

Assume that the banking system has total reserves of $221 billion.

Assume also that required reserves are 13 percent and that banks do not hold any excess reserves and households hold no currency.

What is the money multiplier?

Hint

Assume that the banking system has total reserves of $572 billion.

Assume also that required reserves are 26 percent and that banks do not hold any excess reserves and households hold no currency.

What is the size of the M1 money supply?

Hint

Assume that the banking system has total reserves of $150 billion.

Assume also that required reserves are 10 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreased the required reserves to 8.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $575 billion.

Assume also that required reserves are 25 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreases the required reserves to 20.

What is the level of excess reserves? Make sure to include a negative sign if necessary.

Hint

Assume that the banking system has total reserves of $759 billion.

Assume also that required reserves are 33 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed decreased the required reserves to 26.4.

As a result of this new policy, by how much has the money supply increased?

Hint

Assume that the banking system has total reserves of $448 billion.

Assume also that required reserves are 16 percent and that banks do not hold any excess reserves and households hold no currency.

What is money multiplier?

Hint

Assume that the banking system has total reserves of $493 billion.

Assume also that required reserves are 29 percent and that banks do not hold any excess reserves and households hold no currency.

What is the level of deposits?

Hint

Assume that the banking system has total reserves of $585 billion.

Assume also that required reserves are 45 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 54.

What is the new multiplier?

Hint

Assume that the banking system has total reserves of $1107 billion.

Assume also that required reserves are 41 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 49.2.

What is the level of excess reserves? Make sure to include a negative sign if necessary.

Hint

Assume that the banking system has total reserves of $500 billion.

Assume also that required reserves are 25 percent and that banks do not hold any excess reserves and households hold no currency.

Now suppose that the Fed increased the required reserves to 30.

As a result of this new policy, by how much has the money supply changed?

Hint