Business Finance - Economics Macroeconomic mini assignment
arabella
MacroeconomicsAssignmentnumber11.docxAssignment # 1
1. Assume that the required reserve ratio is 15 percent and that SAMA sells SR3 million worth of government securities to a costumer who pays with a check drawn on the Riyad Bank.
a. The excess reserve of Riyad Bank changed by how much?
b. By how much has the money supply changed?
2. Bank 1 received a deposit of SR1 million. Assuming that the banks retain no excess reserves, answer the following questions:
a. The reserve requirement is 25 percent.
1. Fill in the blanks in the table below.
2. What is the deposit multiplier?
Multiple Deposit Creation
|
Round |
Deposits |
Reserves |
Loans |
|
Bank 1 Bank2 Bank3 Bank 4 Bank5 All other banks Totals |
SR1, 000,000 |
SR |
SR |
b. Now the reserve requirement is 5 percent.
1. Fill in the blanks in the similar table.
2. What is the deposit multiplier?
Multiple Deposit Creation
|
Round |
Deposits |
Reserves |
Loans |
|
Bank 1 Bank2 Bank3 Bank 4 Bank5 All other banks Totals |
SR1, 000,000 |
SR |
SR |
3. Assume that in an economy the total money supply, Ms, is SR100; the quantity of output, Q, is 50 units of a good; and the average price, P, of this output is SR10 per unit. Calculate the income velocity of money.
4. Ahmed can make several uses of his money. Indicate for each case whether his money is being used as a medium of exchange (E), a store of value (V), a unit of account (A), or a standard of deferred payment (P).
a. Ahmed has accumulated SR600 in his checking account at a depository institution.
b. Ahmed decides to use this SR600 to purchase an electronic machine and goes shopping to compare the prices being charged by different stores for the machine he wishes to buy.
c. Ahmed finds that the lowest price at which he can purchase the machine he wants is SR498.50. He has the dealer deliver the machine and agrees to pay the dealer in 30 days.
d. Thirty days later Ahmed send the dealer a check drawn on his checking account to pay for the machine.
