Managerial economics
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Get it written →- Explain whether each of the following is counted in the M1 measure of the money supply:
- Cash that you have been saving from birthdays and special occasions.
- Money in your savings account at your credit union.
- Money in your checking account at your credit union.
- Visa gift cards.
- Available balance on your American Express card.
- Refer to the simplified balance sheet for a bank and answer the following questions.
|
Assets |
|
Liabilities |
|
|
Reserves |
$15,000 |
Deposits |
$78,000 |
|
Loans |
$68,000 |
Stockholder’s equity |
$8,500 |
- If the required reserve ratio is 3.5%, how much in excess reserves does this bank hold? Show your work.
- What is the maximum amount this bank can expand on its loans? Show your work.
- What will happen to the M1 money supply if it makes the loans under (b) above and those funds are deposited into another bank by the borrowers?
- Identify and explain each event as:
- part of an expansionary fiscal policy
- part of a contractionary fiscal policy
- part of an expansionary monetary policy
- part of a contractionary monetary policy
- The corporate income tax rate is increased.
- Defense spending is increased.
- Families are allowed to deduct all daycare expenses from their federal income taxes.
- The Federal Reserve Bank sells Treasury securities.
- The Federal Reserve Bank buys Treasury securities.
- Assume the federal government runs a budget deficit in the current fiscal year. Answer the following questions in a 450- to 500-word essay.
- Should the government always be required to balance the budget? Explain why and include the pros and cons.
- How can the federal government fund (finance) the budget deficit?
- If the federal government decides to issue U.S. Treasury securities to fund the deficit, what will happen to the level of national debt, all other factors held constant?
- Assuming the federal government and firms compete for the same savers’ dollars in the loanable funds market, what will likely happen to interest rates?
- Given your answer under (ii and iii) above, is crowding out more or less likely to occur if the deficit is funded by Treasury securities? Explain.
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