Macroeconomy hw

ECON 2028 Homework-7 Dr. Grammy

1. Answer the following questions in detail:

a. Define monetary policy.

b. List and explain each of three instruments of monetary policy.

c. Describe the process and purpose of an easy monetary policy.

d. Explain what the FED would do with each of the three instruments to implement an easy monetary policy.

2. Complete the following table for a new deposit of $5,000 at the First State Bank.

Required Reserve Ratio	Required Reserves	Excess Reserves	Money Created by this Bank	Money Multiplier	Money Created by all Banks
3%
4.0%
5.0%

3. Mary deposits $4,000 of newly printed money in her checking account of Bank A. The FED has set rr = 5%. Complete the following table as money travels from one bank to the next.

Bank	New DD	Change in TR	Change in RR	Change in ER	Money Cretaed by this Bank	Money Multiplier	Money Cretaed by all Banks
A	4,000
B
C
D
Other Banks
Total

4. Commercial banks have $5,000 million in Reserves. In an easy monetary policy, the FED drops the Required Reserve Ratio (rr) from 5% to 4%. Find the increase in the money supply.

Instructions

Show your calculations and give detailed answers to earn full credit. Type your answers in MS Word. Name your answer file Homewrok-7. Attach your file to an E-mail message within Blackboard by 11:00 P.M. Tuesday, April 4, 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)