Money, Banks, and the Federal Reserve System

Money, Banks, and the Federal Reserve System. Money, Banks, and the Federal Reserve System. Money, Banks, and the Federal Reserve System
1. Your Assignment should have a cover sheet with the following information:
● Your Name
● Course Number
● Section Number
● Date
2. You may submit your Assignment using the Unit 7 Assignment template.
3. Your answers should follow the APA format by being in double spaced paragraph format, with
citations to your sources and, at the bottom of your last page, a list of references. Your answers
should also be in Standard English with correct spelling, punctuation, grammar, and style.
4. Respond to the questions in a thorough manner, providing specific examples of concepts,
topics, definitions, and other elements asked for in the questions. Your paper should be highly
organized, logical, and focused.
5. Required Format:
● Correct APA format for answers (cover sheet with name, course number, section number,
unit number, date, answers double spaced, in Times New Roman 12-point font).
Assignment
Assume you are hired as an assistant quantitative analyst at a bank. Given the scenarios
provided in the Assignment, complete the tables and explain the computation results. View the
Chapter 16: “Does the Federal Reserve Control Both the Money Supply and Interest Rates?”
video and the Chapter 17: “Would You Explain Inflation?” video.
This Assignment will assess your knowledge based on the following outcomes:
AB204-4: Describe the roles of money, banking, and the Federal Reserve System in the macro
economy.
[ BU204 | Macroeconomics ]
Page 2 of 5
1) This section deals with increase money supply given two scenarios (see “a” and “b” below).
In Westlandia, the public holds 50% of money one (M1) in the form of currency, and the
required reserve ratio is 20%.
a) Estimate how much the money supply will increase in response to a new cash deposit of
$500 by completing the accompanying table.
(Hint: The first row shows that the bank must hold $100 in minimum reserves — 20% of the $500
deposit — against this deposit, leaving $400 in excess reserves that can be loaned out. However,
since the public wants to hold 50% of the loan in currency, only $400 × 0.5 = $200 of the loan will
be deposited in round 2 from the loan granted in Round 1.)
Round Deposits
Required
reserves
Excess
reserves Loans
Loan
proceeds
held as
currency
Loan
proceeds
deposited
1 $500.00 $100.00 $400.00 $400.00 $200.00 $200.00
2 $200.00
3
4
5
6
7
8
9
10

p(2)

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Money, Banks, and the Federal Reserve System

Money, Banks, and the Federal Reserve System

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