1. Show the changes in T accounts of the Fed, Treasury, Banks and the Public resulting from the following transactions, and explain the impact on the monetary base and money supply (required reserve ratio is 10%).

a. Treasury finances the budget deficit of $100 mn by selling a bond to the public.

b. Treasury finances the budget deficit of $100 mn by selling a bond to the Fed.

c. A bank obtains a discount loan of $100 mn from the Fed.

d. A bank borrows from the Federal Funds Market (from another bank) a loan of $100 mn.

2. Using the following information estimate the simple money multiplier and the general money multiplier.

a. Cash held by public =200 mn

b. Deposits in the Banking System=1 bn

c. Excess Reserves in the Banking System=100 mn

d. Required Reserve Ratio=10%

Answer rating: 100% (QA)

1 2 a Money multiplier 1Required reserve ratio 101010 b Money multiplier i... View the full answer