ECON 308 Problem Set 3 - Assume initially
Question # 00518770
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Updated on: 04/28/2017 02:03 AM Due on: 04/28/2017
ECON 308
Problem Set 3 - Spring 2017
44 Total Points :
Problem Set 3 - Spring 2017
44 Total Points :
In answering the following questions, round all dollar amounts to
the nearest dollar. Round the multipliers and parameter values to
3 decimal places. (Note: Answers will rarely work out to be even
numbers.)
1. Assume initially that:
Currency = $2,200
DD = $4,000
e = .333
required reserves = $240
TD = $12,000
MMMF = $1,400
Determine the initial levels of: kdd, kM1, kM2, MB, M1, M2, and ER.
(1 ea.)
the nearest dollar. Round the multipliers and parameter values to
3 decimal places. (Note: Answers will rarely work out to be even
numbers.)
1. Assume initially that:
Currency = $2,200
DD = $4,000
e = .333
required reserves = $240
TD = $12,000
MMMF = $1,400
Determine the initial levels of: kdd, kM1, kM2, MB, M1, M2, and ER.
(1 ea.)
2. Now the Fed conducts a $350 open market sale to increase the
interest rate and reduce the money supply. Determine the final
values for: MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2
after the OM Purchase runs fully through the deposit creation
process. (2 ea.)
interest rate and reduce the money supply. Determine the final
values for: MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2
after the OM Purchase runs fully through the deposit creation
process. (2 ea.)
3. Go back to the original data given in question 1. Determine the
effect on MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2 if
the currency to DD ratio “c” becomes .25. (For this question,
assume that the Fed takes no action to change the monetary
base.)
(1 ea.)
effect on MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2 if
the currency to DD ratio “c” becomes .25. (For this question,
assume that the Fed takes no action to change the monetary
base.)
(1 ea.)
4. Considering your answer to (3.), what OMO action would be
necessary to keep M1 at its original level if c changes to .25?
(7)
necessary to keep M1 at its original level if c changes to .25?
(7)
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Rating:
/5
Solution: ECON 308 Problem Set 3 - Assume initially