macro-economy homework

ECON 2028 Homework 6 Dr. Grammy

1. List and describe three functions of money.

- barter the direct exchange of goods and service for other goods and service.

- medium of exchange, or means of payment what sellers generally accept and buyers generally use to pay for goods and services.

- store of value an asset that can be used to transport purchasing power from one time period to another.

2. Kirk Deposits $3,000 in dollar bills in his checking account at Bank A. Find the change in

a. M1 =

b. M2 =

3. Mary deposits $1,500 in dollar bills in her saving account at Bank B. Find the change in

c. M1 = 0

d. M2 = 1,500

4. Use the following data to calculate M1 and M2.

Money market accounts = 190 Credit card balances = 800

Stock market holdings = 1,000 Checking account deposits = 950

Coins and bills held outside banks = 560 Money market mutual funds = 450

United States saving bonds = 700 Travelers’ checks = 150

Other checking account deposits = 380 Saving account deposits = 900

Treasury notes = 650 United States oil reserves= 900

United States gold reserves = 870

a. M1 =

b. M2 =

5. Mr. Smith deposits $2,400 in her checking account at Bank C. Given a required reserve ratio of 3%, find the bank’s

a. RR =

b. ER =

c. The maximum amount of new loans by Bank C =

6. First Union Bank has $8,000,000 in reserves and $15,000,000 in checking deposits. With a required reserve ratio of 5%, calculate

a. RR =

b. ER =

c. The maximum amount of loans First Union Bank =

d. Money Multiplier =

e. The maximum amount by loans by all banks =

Instructions

Show your calculations and give detailed answers to earn full credit. Type your answers in MS Word. Name your answer file Homewrok-6. Attach your file to an E-mail message within Blackboard by 11:00 P.M. Wednesday, March 29, 2017. Late homework assignments and homework assignments not written in Word or not received in Blackboard will not be graded.

Submit your homework to:

Elizabeth Fernandez (Grader)

Breanna Young (Grader)

Note:

This is an individual assignment; it is not a team/group assignment.

See me or an ECON tutor if you need assistance.