ECON 102 - Under the conditions described above, what open market

Question # 00677628 Posted By: dr.tony Updated on: 04/26/2018 12:07 PM Due on: 04/26/2018
Subject Economics Topic Macroeconomics Tutorials:
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The quantity of exchange: MV = PY is true by definition. Now suppose that the money supply (M) is initially at $100 while velocity (V) is constant at 5 and initial nominal GDP (PY) at $500. Finally, suppose that nominal GDP (PY) consistent with natural rate of output is $600 and the Fed's required reserve ratio is 20%

  • Under the conditions described above, what open market operations should the Fed undertake? Why? Use money market to show the effect of this open market operation.
  • Under these conditions, how many dollars would the Fed target for the money supply? Show your calculations.
  • By how many dollars would the Fed have to change total reserves in the commercial banking system to hit its money supply target? Show your calculations and briefly explain your reasoning.
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  1. Tutorial # 00676828 Posted By: dr.tony Posted on: 04/26/2018 12:08 PM
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