Money is created when a bank receives a deposit, sets some of the funds aside for reserves, and loans out the rest. Deposits have at this point increased by the amount of the original deposit and the amount of the loan.
The size of this money multiplier depends on the required reserve ratio, the part held back by the banks, much as the expenditure multiplier depends on the marginal propensity to save, the part of income held back rather than consumed.
Simple Money Multiplier= 1/Required reserve ratio
Simple Money multiplier= 1/5%
Simple Money Multiplier= 100/5
Simple Money Multiplier= 20
But this is really an oversimplified view because it assumes that everyone deposits all of their money into the bank and that the banks loan out all they are legally allowed. Neither assumption is accurate. Individuals and firms hold cash, banks hold reserves in excess of the requirement, and some funds leave the country and are held by foreigners. These are referred to as leakages; a more accurate money multiplier would account for these leakages as well as required reserves.
Leakage adjusted money multiplier= 1/Required reserves+leakages%
Leakage adjusted money multiplier= 1/40%
Leakage adjusted money multiplier= 100/40
Leakage adjusted money multiplier= 2.5
With leakages, less is loaned out throughout the multiplier process, and the resulting money multiplier is smaller. During financial crises, banks are more hesitant to make loans, and so excess reserves will increase. The money multiplier therefore decreases.
This is because during financial crisis the banks aren't willing to engage into transactions more,they aren't willing to lend and accept deposits due to more such possibilities of default as a result the monetary base falls and reserve requirements rises (to restrict money supply).
Cash held by the Federal Reserve is not a leakage because this cash is not even part of the official money supply. It becomes money only when it leaves the Fed and circulates among firms, banks, and individuals.
what are the areas of economic strength for japan
Answer:
privileged location in a dynamic region
How is what i learn in a world politics course relevant to my life and my responsibilities as a citizen in a democratic country?
Describe the nature and lifestyle of the people during different seasons
joe mama so fat"she joined the hunger games thinking it was a eating competition"
Explanation:
Select the best term to describe different approaches to federal finance.
a. Policymakers should reduce spending and increase taxes when the economy is growing in order to prevent "overheating."
b. This approach was considered conventional wisdom until the advent of the Great Depression.
c. Policymakers should focus on keeping unemployment low and providing the people with the public goods and services they want.
d. If insisted upon, this approach would only worsen the economy during a recession.
e. This approach ignores the impact of the budget on the business cycle.
WORD BANK
functional finance
cyclically balanced budget
annually balanced budget
a. Cyclically balanced budget
b. Annually balanced budget
c. Functional finance
d. Annually balanced budget
e. Functional finance
Cyclically balanced budget is one which is balanced over a business cycle instead of yearly. Such a budget makes sure that the needs of economy are met during various stages of business cycle. When the economy is on a stage of growth, or a boom, a cyclically balanced budget would increase taxes and reduce spending so that the aggregate demand stays low.
Until the Great Depression, budget was balanced each year, which is characterised by increased taxation and spending cuts by the government. Both of this forced the economy into a worse state during the Great Depression. During recession and depression, the economy needs to be stimulated and money should be injected, both of which cannot be done through a balanced budget.
Functional finance puts greater emphasis on the effects of government spending and taxation instead of the concept of balanced budget. Such fiscal policy measures can improve various factors like unemployment and public good availability by focusing on these factors through various policies. Unemployment can only be rectified through greater spending and reduced taxation, which is possible through functional finance
During a recession, the economy is at a stage of negative growth. The only policy response that can improve such a situation is by injecting more money into the economy and by stimulating aggregate demand. But through an annually balanced budget, the emphasis is on keeping the revenue and expenditure equal, which means greater taxation and spending cuts. This can worsen a recession.
In case of functional finance, more emphasis is placed on the effect certain policies can have on the economy. It boosts employment and other factors. But at the same time, it does not take into consideration the impact of the fiscal policy measures on the business cycle.
Until the 1930s, conventional wisdom held that the federal government should have a balanced budget each year, meaning that expenditures would equal revenue and no more for each fiscal year. However, the coming of the Great Depression, which brought a drastic increase in expenditure alongside an increase in spending, showed how this approach would only worsen the situation during times of recession and another approach would be needed.
A cyclically balanced budget does not seek to balance the budget each year, but rather keep it balanced along with the business cycle. The goal here is to decrease spending and increase taxes during economic expansions as a way to soften the blow, or even create a surplus, in preparation for the inevitable contraction of the economy.
The functional finance approach argues that policy makers should focus on providing the public with the goods and services they demand and ignore the business cycle while focusing on maintaining employment. A budget deficit or surplus is of secondary concern to adherents of this approach.
two roles of a community leader
Answer:
1. Work with the community members on problems and try to resolve them.
Explanation:
2. Be a leader, have clear goals and objectives.
Which of the following requirement had to be met before a state could be formed in the northwest territory a the government decided to declare a specific part of the territory a state A religious group claim land for it on in order to start a religious community one of the original 13 states claimed section on the territory fortune 60,000 people or more lived in the area
Answer:
your answer is in the question
Explanation:
you have to have 60,000 people or more to become a state
There are three ducks, four cows, and two cats. How many legs are there?
Answer:
Six legs.
Explanation:
the most accepted answer for this riddle is six. While some people think the answer to be zero as the think that all the animals listed are on the bed and the chickens flying is a distraction.
Answer:
16 cow legs, 6 duck legs, 8 cat legs. In total, there are 30 legs.
(correction: SIX legs)
What steps could be taken to prevent light pollution?
Answer:
Turn the lights off when you're not using them, replace outdoor lights(if you have any) with low glare ones, and replace bulbs with more efficient ones. Something you could also do is aim outdoor lights downwards and pull down the blinds or shut the curtain.
Explanation:
Hope this helps:)...if not then sorry for wasting your time and may God bless you:)
The nation of Cantania regularly experiences changes in its national budget situation. In some years, Cantania operates with a budget deficit, while in other years it experiences a budget surplus. Please classify each of the possible consequences into the appropriate category of the budget circumstance most likely to cause them.
Answer:
Increase in Budget Surplus would be there when
-The government of Cantania stops borrowing from foreign nations.
-More funds are made available for private investment in physical capital.
Increase in the Budget deficit would be there when
-Interest rates in Catania rise
-Cantania's government increases its demand for financial capital
Explanation:
As an increase in budget surplus occurs, more financial capital is made available to the government. The government will thus no longer have to borrow from outside sources, and more funds become available for private investment.
When there is an increase in the budget deficit, the government requires more financial capital, so there will be an increase in quantity of financial capital demanded. Interest rates are likely to rise as a result of the higher competition for financial capital.
Do you think telenovelas educate people in this country Yes [ ] No [ ]
1. Give reasons for your answer
a).
b)..
c)....
Answer:
Telenovelas play an important role in communicating Latin American issues. Viewers watch and engage with this popular melodramatic medium on a daily basis. As a result, telenovelas are a valuable ritual for Latin Americans. Telenovelas affect how societies view themselves.
Explantion:
What obstacle was faced by both Central Pacific and Union Pacific workers?
attacks from Indigenous People on the plains
danger from blasting through the Sierra Nevada
harsh weather conditions
loss of workers to the Gold Rush
Answer:
Harsh Weather Conditions
Explanation:
Such conditions make it hard to work which also decreases their quality as well.
Which line from the
passage best supports the idea
that the printing press was an important invention?
x "The printing press, introduced in Europe"
"Soon, printers were in business across Europe"
S
"Gutenberg's invention changed all that"
"The ideas of the Reformation began to spread"
Gutenberg's press is considered to be one of the most remarkable inventions in history as it allows for the transfer of knowledge.
What is the most important result of the printing press?The immediate effect was that it transmitted information quickly and accurately. This has helped to build comprehension in public reading and writing.
Gutenberg's press was invented by Johannes Gutenberg about 1439. Johannes was a blacksmith who invented the first printing press.
Thus, "The ideas of the Reformation began to spread" best supports the idea that the printing press was an important invention.
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Answer:
D-The ideas of the Reformation began to spread”
Explanation:
How has the telephone evolved?
There are TV's that are phones.
There are watches that are phones.
Telephones haven't changed much over time.
There are phones with cords.
Answer:
there are watches that are phones
Explanation:
What is a check on the power of the Supreme Court?
Answer:
judicial branch is the answer
Explanation:
have a nice day
As a result of the 1763 Treaty of Paris, England gained new land and territory in North America. Why did this contribute to the desire for independence?
STE
(C) the French
(D) Native Americans
Which of the following events occurred first?
(A) Columbus claimed San Salvador for Spain.
(B) Europeans found a water route to Asia.
(C) Magellan sailed around South America into the Pacific Ocean.
Does the WTO impact State Sovereignty
(IS WALMART GOOD FOR AMERICA VIDEO)
What most surprised you about this film?
Answer:
That Walmart is good for america.
Explanation:
The No Child Left Behind Act of 2001 aimed to promote equality of opportunity with which two provisions? Group of answer choices:
a provision that required schools to show positive test results for all subcategories of children and a provision that allowed parents of children in failing schools to transfer their children to better schools
a provision that mandated a standardized national test to evaluate all K-12 students and a provision that provided scholarships for students in failing public schools to attend private schools
a provision that mandated a standardized national test to evaluate all K-12 students and a provision that created federally run “scholarship academies” for low-income students that scored highly on the national tests
a provision that outlawed all standardized testing in K-12 schools and a provision that mandated busing to integrate racially homogenous schools
Answer:
1.The major focus of No Child Left Behind is to close student achievement gaps by providing all children with a fair, equal, and significant opportunity to obtain a high-quality education.
2.The primary benefit of the No Child Left Behind Act was that it allowed each state in the US to develop their own achievement standards. It placed an emphasis on annual testing for those skills, tracking academic process for individual students, and improving teacher qualifications.
Explanation:
i hope this helps
Which statement best defines the permanent income hypothesis?
Consumer spending is proportional to the ratio of people in stable full‑time employment– that is, with "permanent" income–and people in unstable part‑time employment–that is, with "temporary" income.
When in a recession, although current consumer spending can be observed, future consumer spending cannot be predicted due to an unknown number of people leaving their temporary recession jobs for higher‑paying, permanent jobs that better fit their skills.
Consumer spending depends on both the income and wealth of people in the economy.
Consumer spending depends on the level of disposable income that people expect to have over the course of their lifetime.
Which statement is an example of an open market operation?
The Federal Reserve sells bonds via the commercial banking system.
Naftali runs a bazaar in Baghdad, Iraq, selling trinkets to tourists.
The central bank lowers the interest rate from 5% to 3% on the loans it gives to commercial banks.
A bank loaning out all but the requisite 10% of its funds to hold in storage.
Answer:
A. The Federal Reserve sells bonds via the commercial banking system.
Explanation:
Open market operations are liquidity injecting or liquidity absorption from the economy by the central bank through the selling or buying of government securities.
Open market operations involve the central bank influencing the money supply and the interest rate through selling or buying bonds. The Federal Reserve Bank selling bonds to the public through commercial banks is an example of this.
When central bank wants to increase the money supply in economy, it buys the boonds (with the help of commercial banks) from the public. Central bank receives the bonds and gives money to the public. In this way money supply increases in economy.
Banks often have an incentive to loan out all funds up to the reserve requirement, which is the amount a bank must hold as vault cash or on deposit with the Federal Reserve Bank, but this is not an open market operation.
If central bank wants to decrease the money supply it sells the bonds to the public. Central bank lowering the interest rate is not included in open market operations but it is a instrument of monetary policy. Open market operations are different from monetary policy.
Increasing or decreasing the discount rate, which is the rate at which the Federal Reserve loans money to commercial banks, affects the money supply, but this is not considered an open market operation.
The statement is an instance of an open market operation is "The Federal Reserve sells bonds via the commercial banking system." Thus, option A is correct.
What is Federal Reserve?The Federal Reserve System is the United States of America's central banking system.
The central bank uses open market operations to inject or absorb money into the economy by selling or purchasing government securities.
The Federal Reserve uses open market operations to influence the money supply and interest rates by selling or purchasing bonds. One example is the Federal Reserve Bank selling bonds towards the public through commercial banks.
When the central bank wishes to raise the money supply in the economy, it purchases bonds from the public (with the support of commercial banks). The central bank receives the bonds and distributes the proceeds to the general population. In this approach, the economy's money supply expands. Hence, option A is correct.
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I am needing help making a graph for supply and demand with todays gas prices. someone help!!!! :)
Answer:
Like demand, supply can be illustrated using a table or a graph. A supply schedule is a table, like a table below, that shows the quantity supplied at a range.
1) How does the vision of the underworld transform from Homer to Virgil to Dante
Answer:
They are gradually worsening
Explanation:
Homer: Homer depicts the land of the dead as gloomy, frightening, dark and generally unpleasant for his heroes to endure. There is nothing rewarding about an existence there.
Virgil:Virgil’s underworld ethical scores are settled. Those that have done well in life get beautiful afterlives, joyful and happy things surround their eternity. Those that have been evil in their lives are physically punished.
Dante: Dante sees Hell depicted as nine concentric circles of torment located within the Earth; The circles are concentric, representing a gradual increase in wickedness, and culminating at the centre of the earth, where Satan is held in bondage. The sinners of each circle are punished for eternity in a fashion fitting their crimes
Over the past year, Ionia's money supply increased by $6 billion, $4 billion in bonds were sold to the public, an unused military base was sold for $3 billion, and the government spent $20 billion.
Ionia had a budget
- surplus.
- deficit.
Determine the amount of Ionia's budget deficit or surplus. (in billions of dollars)
Determine the amount of Ionia's tax revenue for the year. (in billions of dollars)
Answer:
deficit
$13 billion
$7 billion
Explanation:
Much like a cash‑strapped individual may run up a credit card bill or sell a TV set, governments must borrow or sell assets to cover a budget deficit. The government budget constraint summarizes these options.
− = ΔM + ΔB + ΔA
In the equation, is government spending, is tax revenue, ΔM is changes in the money supply, ΔB is bonds sold to the public, and ΔA is assets sold. If government bonds are sold to another government agency, the money supply increases by that amount. If is greater than , there is a budget deficit and the budget constraint will be a positive number.
As the numbers show, Ionia has a deficit of $13 billion.
− = ΔM + ΔB + ΔA
= $6 billion + $4 billion + $3 billion
= $13 billion
Use this deficit and Ionia's government spending of $20 billion to determine tax revenue.
− = $13 billion
= − $13 billion
= $20 billion − $13 billion
= $7 billion
Consider the different characteristics of the aggregate demand curve and the short‑run aggregate supply curve. For each statement below, determine which curve is being described.
a. Desired purchases of goods and services at different price levels
b. Shifts when productivity changes
c. Shifts when consumer wealth changes
d. Upward‑sloping
e. Real GDP that firms produce at various price levels
f. Shifts when the cost of oil changes significantly
g. Downward‑sloping
WORD BANK
aggregate demand
short-run aggregate supply
Answer:
a. aggregate demand
b. short-run aggregate supply
c. aggregate demand
d. short-run aggregate supply
e. short-run aggregate supply
f. short-run aggregate supply
g. aggregate demand
Explanation:
Aggregate Demand: The aggregate demand curve shows the level of output of goods and services demanded at different price levels. It slopes downwards because as the price level decreases, the quantity of goods and services demanded rises. Any change in consumption, investment, government spending, or net exports causes the aggregate demand curve to shift. A change in consumer wealth allows households to purchase more goods and services at all price levels. As a result, the aggregate demand curve shifts.
Short‑Run Aggregate Supply: The short‑run aggregate supply shows the level of output firms will produce at various price levels. In the short‑run, it slopes upwards because, as prices increase and input costs remain fixed, profits will increase with output. Any change in the cost of production shifts the short‑run aggregate supply curve. A change in the cost of oil shifts the aggregate supply curve, since oil is a major input in the production and transportation of most goods. A change in productivity changes the efficiency of firms, causing costs to change and the short‑run aggregate supply curve to shift.
qualitative sociology can be defined as
Hi!qualitative sociology can be defined as In-depth interviews, focus groups, and/or analysis of content sources of its data.
You have just begun a new job as a bank teller at Santa's Elf Bank. Your supervisor asks you what the difference is between reserves and excess reserves in terms of banking. You want to impress your supervisor, so you recall what you learned in your economics course in order to form your response.
What is the difference between reserves and excess reserves in terms of banking?
Excess reserves refer to the required amount that the banks have on hand beyond the required reserve amounts, and thus, is available to loan out. Reserves are the funds banks keep on hand to meet reserve requirements established by the Fed.
Reserves refer to the cash that banks have on hand to satisfy the demands of their employees and the reserve requirements of the Fed. Excess reserves refer to the amount of reserves banks have in excess of employee reserves.
Reserves refer to the cash banks have on hand to satisfy the Federal Reserve requirements. Excess reserves refer to the amount of reserves that banks have in excess of the legally required reserves.
Excess reserves refer to the reserves that the banks have to deposit with the Fed. Reserves are the money that banks have on hand to loan to their customers.
A chimpanzee and a pine tree have very little in common. However, because they are both living things, we can be certain that they both
A . use the sunlight to make their own food
B . travel with other members of their species
C . have a skeleton which allows them to move
D. are made up of one or more cells
Answer:
D
Explanation:
d is the Best option. yes yes yes
according to peter berger which is a major characteristic of modernization brainly?
A. A decrease in small traditional communities
B. An Orientation to look toward the past
C. A Decrease in social diversity
D. A decrease in personal choice
Peter Berger believes that a major characteristic of modernization is a. A decrease in small traditional communities.
How do we know that modernization is happening?When there is modernization, communities will become larger and more urban and modern in nature.
This means that small traditional communities will decrease in number which is what Peter Berger meant.
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Phil Frugal has been saving his pennies since he was 5 years old. He is now 45 and deposits his savings in a bank. His pennies total $5,000. Using this information and your knowledge of the banking system, select the best match for each item. Then calculate the values of reserves, required reserves, and excess reserves. Assume a required reserve ratio of 10%.
a. The amount of interest the bank must charge on a loan
b. The amount of funds banks must, by law, hold in reserve
c. The amount a bank has on hand to fulfill the cash demands of its customers and the reserve requirements of the Fed
d. The amount of reserves the bank owes to other banks
e. The maximum amount of reserves available for loans
f. The amount of reserves the bank must set aside to loan to member banks
WORD BANK:
required reserves
excess reserves
reserves
none of these
Enter the values of reserves, excess reserves, and required reserves.
Reserves: $__________
Excess reserves: $___________
Required reserves: $____________
If his pennies total is $5,000 and required reserve ratio is 10%. Reserves $500; Excess reserves $4,500; Required reserves $5,000.
Reserves, excess reserves and required reservesa. Reserves
Reserves=Pennies total×Reserve ratio
Reserves=$5000×0.10
Reserves= $500
b. Excess reserves
Excess reserves=Pennies total+Reserves
Excess reserves=$5000-$500
Excess reserves= $4,500
c. Required Reserves:
Required reserves=Reserves+Excess reserves
Required reserves=$5,000
Therefore Reserves $500; Excess reserves $4,500; Required reserves $5,000.
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Answer:
a. The amount of interest the bank must charge on a loan
none of these
b. The amount of funds banks must, by law, hold in reserve
required reserves
c. The amount a bank has on hand to fulfill the cash demands of its customers and the reserve requirements of the Fed
reserves
d. The amount of reserves the bank owes to other banks
none of these
e. The maximum amount of reserves available for loans
excess reserves
f. The amount of reserves the bank must set aside to loan to member banks
none of these
Enter the values of reserves, excess reserves, and required reserves.
Reserves: $5000
Excess reserves: $4500
Required reserves: $500
Explanation:
Reserves refer are the cash a bank keeps on hand to meet the cash demands of customers and the deposits the bank holds at the Fed. In this case, reserves amount to $5,000.
Required reserves are the portion of reserves banks are required by law to keep in their vaults or on deposit at the Fed. Banks are not permitted to loan required reserves. A required reserve ratio of 10%, as given in the problem, means that 10% of Phil's deposit of $5,000 must be set aside by the bank.
Excess reserves are the reserves left over after the bank has taken out required reserves. This is the maximum amount a bank can loan out to borrowers. In this case, the bank has
Required reserves on deposit=deposit × reserve ratio=$5000×0.10=$500
Excess reserves=$5000−$500=$4500