1) Suppose you deposit $1,000 of currency into your checking account. What happens to reserves, checkable...

 

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1) Suppose you deposit $1,000 of currency into your checking account. What happens to reserves, checkable deposits, and the monetary base? Illustrate your answer with T-accounts for the Fed, the banking system, and the nonbank public. 2) Consider the simple deposit expansion model. The banking system has excess reserves of $80 million and the required reserve ratio is 20%. What is the maximum potential expansion of checkable deposits? 3) A bank has excess reserves of $4,000 and checkable deposits of $100,000. Calculate the bank's actual reserves if the reserve requirement is 15 percent. 4) Suppose the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $1,000 billion, and excess reserves total $1 billion. Calculate the money multiplier. 5) Suppose the required reserve ratio is 0.12, the currency ratio is 0.6, and the excess reserve ratio is 0.03. The Fed decides to sell $5 billion of securities through open market operations. Calculate the effect on the money supply and indicate whether it increases or decreases. In other words, what is the change in the money supply? 1) Suppose you deposit $1,000 of currency into your checking account. What happens to reserves, checkable deposits, and the monetary base? Illustrate your answer with T-accounts for the Fed, the banking system, and the nonbank public. 2) Consider the simple deposit expansion model. The banking system has excess reserves of $80 million and the required reserve ratio is 20%. What is the maximum potential expansion of checkable deposits? 3) A bank has excess reserves of $4,000 and checkable deposits of $100,000. Calculate the bank's actual reserves if the reserve requirement is 15 percent. 4) Suppose the required reserve ratio is 15 percent, currency in circulation is $400 billion, checkable deposits are $1,000 billion, and excess reserves total $1 billion. Calculate the money multiplier. 5) Suppose the required reserve ratio is 0.12, the currency ratio is 0.6, and the excess reserve ratio is 0.03. The Fed decides to sell $5 billion of securities through open market operations. Calculate the effect on the money supply and indicate whether it increases or decreases. In other words, what is the change in the money supply?