Macro Economics Question
Assignment # 1 1. Assume that the required reserve ratio is 15 percent and that SAMA sells SR3 million worth of government securities to a customer who pays with a check drawn from the Riyad Bank. a. The excess reserve of Riyad Bank changed by how much? b. By how much has the money supply changed? 2. Assume a 5% required reserve ratio, zero excess reserves, no currency leakage, and a ready loan demand. SAMA buys a SR1 million government bond from investment institution. a. What is the maximum money multiplier? b. By how much will total deposits rise? 3. 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 Bank 1 Bank2 Bank3 Bank 4 Bank5 All other banks Totals Deposits SR1, 000,000 Reserves SR Loans SR b. Now the reserve requirement is 5 percent. 1. Fill in the blanks in the similar table. 2. What is the deposit multiplier? Round Bank 1 Bank2 Bank3 Bank 4 Bank5 All other banks Multiple Deposit Creation Deposits Reserves SR1, 000,000 SR Loans SR Totals 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. 5. Consider a closed private economy in which C = SR30 + 3/4Y and I = SR25. What will the equilibrium level of real national income (Y) be equal to in this economy? (Hint: In equilibrium, real national income must equal total planned expenditures or Y = C + I.). 6. Suppose the adult population of Saudi Arabia by groups, as of April 2020: the number of employed is 10.5 million, the number of unemployed is 1.5 million, and those not in the labor force is 4 million c. Compute the unemployment rate. d. Compute labor force participation rate. 7. Suppose you are given the following data on the labor market in a particular country: Total adult population (over 16 years old): 2 million. Employment rate: 95% Number of individuals without job activity looking for one: 100,000 Number of discouraged workers: 100.000 a. Calculate the unemployment rate. Show your work (2 marks) b. Calculate the total labor force. Show your work (2 marks) c. Suppose 50,000 employed individual lost their jobs due to an economic recession (assume that all of them start looking for jobs), while 10,000 individuals who were previously unemployed found a job. Recalculate the new unemployment rate assuming the size of the labor force remains constant. Show your work (2 marks)
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