Premium Essay

Macroeconomics

In: Business and Management

Submitted By dlpettitt
Words 578
Pages 3
Unit 7 Assignment

Question:
In Westlandia, the public holds 50% of M1 in the form of currency, and the required reserve ratio is 20%.

1. Estimate how much the money supply will increase in response to a new cash deposit of $500 by completing the accompanying table.

As shown below, loans can expand by $666.60. Although deposits increase by $833.25 and the currency held by the public fell by

(Hint: The first row shows that the bank must hold $100 in minimum reserves — 20% of the $500 deposit — against this deposit, leaving $400 in excess reserves that can be loaned out. However, since the public wants to hold 50% of the loan in currency, only $400 × 0.5 = $200 of the loan will be deposited in round 2 from the loan granted in Round 1.)

Round | Deposits | Required reserves | Excess reserves | Loans | Loan proceeds held as currency | Loan proceeds deposited | 1 | $500.00 | $100.00 | $400.00 | $400.00 | $200.00 | $200.00 | 2 | 200.00 | 40.00 | 160.00 | 160.00 | 80.00 | 80.00 | 3 | 80.00 | 16.00 | 64.00 | 64.00 | 32.00 | 32.00 | 4 | 32.00 | 6.40 | 25.60 | 25.60 | 12.80 | 12.80 | 5 | 12.80 | 2.56 | 10.24 | 10.24 | 5.12 | 5.12 | 6 | 5.12 | 1.02 | 4.10 | 4.10 | 2.05 | 2.05 | 7 | 2.05 | 0.41 | 1.64 | 1.64 | 0.82 | 0.82 | 8 | 0.82 | 0.16 | 0.66 | 0.66 | 0.33 | 0.33 | 9 | 0.33 | 0.07 | 0.26 | 0.26 | 0.13 | 0.13 | 10 | 0.13 | 0.03 | 0.10 | 0.10 | 0.05 | 0.05 | totals | $833.25 | $166.65 | $666.60 | $666.60 | $333.30 | $333.30 | | | | | | | |

2. How does your answer compare to an economy in which the total amount of the loan is deposited in the banking system and the public does not hold any of the loans in currency? (Hint: Do

Similar Documents

Premium Essay

Macroeconomics

...MACROECONOMICS PRIYANKA DEY FT171068 What is actually Macroeconomics? The branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity. So the word can be interpreted as the driving forces, factors and decisions ultimately implemented as policies that corresponds to the growth of economy of the nation are included in Macroeconomics. Let’s focus on the prospects how China managed to enter into the race turning its macroeconomics strategies and outshine as one of the major economic success taker with respect to United States. UNITED STATES(18558.13 Billions of $ GDP)- The U.S. economy has been the largest and most important in the world. The U.S. economy represents about 20% of total global output, and is still larger than that of China. The U.S. economy features a highly-developed and technologically-advanced services sector, which accounts for about 80% of its output.The U.S. also has an important manufacturing base, which represents roughly 15% of output. The U.S. is the second largest manufacturer in the world and a leader in higher-value industries such as automobiles, aerospace, machinery, telecommunications and chemicals.The country has access to abundant natural resources and a...

Words: 503 - Pages: 3

Premium Essay

Macroeconomics

...wages from work, households can then buy goods produced by ... Spending that puts money into the circular flow of income. .... thanks for the comments in the research about the income and expenditure. NZIER's Moniac machine | NZIER| Economic Analysis | Forecasting ... nzier.org.nz/about-nzier/moniac-machine‎ In the past, many visitors to the New Zealand Institute of Economic Research (NZIER) ... of a Kiwi dairy farmer, Phillips left New Zealand before finishing school to work in Australia. ... At LSE Phillips was interested in the circular flow of money model. ... variables such as consumption, taxes, government spending, investment, ... Macroeconomics Circular Flow Free Research Papers 41 - 60 www.termpaperwarehouse.com/subcategory/...circular-flow/3‎ Free Research Papers regarding Macroeconomics Circular Flow for download. ... expenditure and income totals in the circular flow of expenditure and income. Circular flow of income - Wikipedia, the free encyclopedia en.wikipedia.org/wiki/Circular_flow_of_income‎ This process is unending and forms the circular flow of income, expenditure and production. .... Statements consisting only of original research may be removed. Economic Perspectives: The Circular Flow Diagram econperspectives.blogspot.com/2008/04/circular-flow-diagram.html‎ Apr 4, 2008 - A circular-flow diagram is a visual model of the economy that illustrates ... For example, when people work for a business, they...

Words: 472 - Pages: 2

Premium Essay

Macroeconomics

...Running Head: MACROECONOMICS TERM PAPER 1 Macroeconomics Term Paper MACROECONOMICS TERM PAPER 2 Abstract Using the required United States economic indicators the federal government uses to guide the economy, I researched and analyzed each indicator by comparing the data from 2010 to that of 2011. Even though a large number of economists are optimistic, my opinion is that while recovery is progressing, the pace at which we are moving is not fast enough to rejuvenate consumer confidence. Based on what I have read and have learned in the classroom over the last few weeks, I am even more concerned for our future than I was before I started to learn the world of economics. The comparisons of the economic indicators paint a very dismal picture to me. MACROECONOMICS TERM PAPER 3 Gross Domestic Product After learning what the Gross Domestic Product (GDP) is, I better understand the data I researched. Based on what I read on the Bureau of Economic Analysis website, Table 1 – Real Gross Domestic Product and Related Measures, the Gross Domestic Product for June of 2010 (Q3) was 2.5 percent compared to the Gross Domestic Product of 2.0 percent, only a year later in June of 2011 (Q3); a deficit of .5 percent between the two years. The...

Words: 2646 - Pages: 11

Premium Essay

Macroeconomics

...Fundamentals of Macroeconomics Paper Charles R. Davis Jr. ECO 372 November 12, 2014 Mike Garrison Fundamentals of Macroeconomics Paper The study of macroeconomics examines individuals on a very large scale. Society is constantly changing trends and behaviors that can be interpreted into number results. This paper will focus on and give examples of economic activities, such as purchasing groceries, massive layoffs of employees, and decrease in taxes. All of these things affect the government, households, and businesses in one way or another. Also I will describe the flow of resources from one entity to another for each activity as well as relate at least one current event to the activities. The GDP or the gross domestic product, nominal GDP, real GDP, inflation rate, unemployment rate, and interest rates all affect our economy. These areas will determine the influence over how we purchase groceries, whether layoffs are at an all time high or decrease in taxes. The definition of the GDP is basically the market value of services and goods that are produced in the country at any given time. Real GDP is the measure of the value of economic output that adjusts for price changes. Nominal GDP is a gross domestic product figure that has not been adjusted for inflation. Purchasing Groceries Purchasing groceries helps out mainly the government because of the tax revenue that it brings in. It helps businesses because of the money they receive of your purchase. Vegetables, meats...

Words: 705 - Pages: 3

Premium Essay

Macroeconomics

...Essay Plans Macroeconomic Policy Introduction Macroeconomic policies refer to policies directed at stabilising the aggregate level of economic activity or output. The fundamental rationale for government macroeconomic intervention is to stabilise fluctuations in the business cycle. Through the conduct of such ‘counter cyclical’ or ‘stabilisation’ policies the government seeks to achieve three major objectives. • Economic growth that is sustainable in delivering rising real incomes whilst minimising inflationary pressures and the current account deficit as a percentage of GDP; • Internal Balance, which is characterised by full employment and price stability; • External Balance, which involves financing import expenditure with export income, stability of the exchange rate, and minimising the levels of net foreign liabilities and net foreign debt as a percentage of GDP. Other objectives include ensuing that the benefits of economic growth are enjoyed by all groups of the population through an equitable distribution of income, as well as ensuring that economic growth and development is ecologically sustainable such that it meets the needs of present generations without compromising the ability of future generations to meet their own needs. Macroeconomic policies operate on the demand side of the economy since changes in the settings or stances of fiscal and monetary policies will impact on the growth of aggregate demand. • If AD exceeds AS at the full employment...

Words: 1523 - Pages: 7

Premium Essay

Macroeconomics

...Fundamental of Macroeconomics Paper Glorivi Saladin ECO/372 02/04/2015 Mark Freeman Fundamental of Macroeconomics Paper There are several factors that affect our economy, gross domestic product (GDP), real GDP, nominal GDP, unemployment rate, inflation rate, and interest rates. All of these factors have influences over how we purchase groceries, whether there will be massive layoffs of employees, and can also influence taxes. Gross domestic product is the market value of final goods and services produced within a country in a given period. This is commonly considered an indicator of the standard of living within a country. Real GDP on the other hand the measure of the value of economic output that adjusts for price changes. Nominal GDP is a gross domestic product figure that has not been adjusted for inflation. Unemployment rate is the measure of how many people are working and not working in the economy. It is calculated as a percentage by dividing the number of unemployed people by the individuals that are currently in the labor force. The inflation rate is the percentage rate of change in price levels over time, usually one year. . All of these factors are related to our everyday lives and how we manage our money, what we spend our money on, and when we spend our money. Buying groceries sounds like a simple task but when you are on a budget it can be pretty stressful. The cost of groceries affects the government because they are taxed like all other purchases. ...

Words: 889 - Pages: 4

Premium Essay

Macroeconomic

...First Draft of Fundamentals of Macroeconomics Paper There are numerousissues that actually affect our economy, such acts as gross domestic product (GDP), nominal GDP, real GDP, inflation rate, unemployment rate, and as well as interest rates. All of these area actually has massive influences over how we purchase groceries, weather there will be a large amounts of layoffs to employees, and decrease in taxes. What Gross Domestic Products is, is basically the market value of services and goods that are produced in the country at any given time.Which this is usually considered an indication of the normal living situationwithin a country. Real GDP on the other hand is measure of the value of economic output that adjust for price changes. Nominal GDP is a gross domestic product figure that has not been adjusted for inflation. The unemployment rate are usually the measure of the frequency of unemployment and is calculated by dividing the number of people that are unemployed by the percentage of individuals that are actually working in labor field. Inflation rate is the percentage rate of change in price levels over time, usually one year. An interest rate is the rate which interest is paid by a borrower for the use of money that they borrow from a lender. All of these factors are related to our everyday lives and how we manager our money, what we spend our money on, and when we spend our money. Buying groceries sounds like a simple task but when you are on a budget it can be pretty...

Words: 726 - Pages: 3

Premium Essay

Macroeconomics

...MACROECONOMICS UNISA SP2 2012 ASSIGNMENT 2 Q1. The consumption schedule shows the various amounts households plan or intend to consume (spend) at various possible levels of their disposable income (Jackson, et al., 2011). Disposable income that isn’t spent is called ‘savings’. Consumer confidence measures the degree of optimism that consumers feel about the state of the economy and their personal finances, to forecast future spending. Figure 1.1 Source: Jackson et al, 2011 When people expect their real income to increase, they spend more of their current income (saving less), increasing current consumption and the aggregate demand curve shifts rightwards. Conversely, when people expect their real income to decrease, they spend less of their current income (saving more), decreasing current consumption and the aggregate demand curve shifts to the left. Figure 1.2 Source: Jackson et al, 2011 The aggregate expenditure is the sum of expenditures on consumption (C), investment (I), government purchases (G) and net exports (NX). AE = C + I + G + NX Figure 1.3 graphs aggregate expenditure. Where the aggregate expenditure line crosses the 450 line, indicates the Gross Domestic Product level. Gross Domestic Product (GDP) is the total market value of all final goods and services produced in the economy during a specific period (Jackson, et al., 2011). Figure 1.3 Source: Jackson et al, 2011, p184 The foreign exchange rate refers to the value of the Australian Dollar...

Words: 1185 - Pages: 5

Free Essay

Macroeconomics

...Abstract This paper will show some general data on Guyana’s economic organizational functions and structure as well as it economic condition. Guyana one the poorest and tiniest country in South America has made great strides in becoming independent. The important part that it plays in the Caribbean Community was founding the Common Market (CARICOM). Guyana’s standing as one of the party’s poorest associates restricts its capability to exercise authority in local activities. Macroeconomics Guyana is now known as the Cooperative Republic of Guyana. This country is situated on the northern coast of South America. This country was formerly recognized as the British Guiana and with the Dutch and British as a former colony (about.com, 2012). Guyana is the third tiniest country of South America and its official language is English. Also, Guyana is considered a part of the Anglophone Caribbean; the independent English-speaking Caribbean region (about.com, 2012). Today Guyana is deemed as a republic with an executive branch of government filled by the president and the prime minister. Some of the concerns with the economy are that The Guyanese economy displayed modest economic progression in recent years and is centered mainly on agriculture and extractive industries (state.gov, 2011). The economy is very much reliant on the distributing of 6 goods which are: sugar, gold, and bauxite, shrimp, timber, and rice which speaks for approximately 60% of the country's GDP and are...

Words: 927 - Pages: 4

Premium Essay

Macroeconomics

...Instructor Williams Macroeconomics GNST2870 #99005 Due: July 29, 2014 Homework Set 11 1. The sellers in the product markets are businesses (sellers of consumer goods), as the households are the buyers. In factor markets, households are the sellers; they sell resources such as labor, land, capital, and entrepreneurial ability. 2. U.S. imports total: $1,360 billion U.S. exports total: $950 billion U.S. net exports: $1,360 billion – $950 billion = $410 billion 3. a. False b. True c. False 4. Y: GDP C: Consumer spending G: Government spending I: Business spending/ investment X: net exports 5. If the price level and the level of real GDP both increase, it would be more likely that the aggregate demand curve shifted. This shift would represent an increase as it shifts to the right. 6. The graph depicts a shift with the aggregate demand cure moved to the right (outward), displaying an increase on real GDP per year. 7. If the price level of all U.S. goods increased, U.S. consumers would have to substitute with a generic or store brand. Even if the generic product ended up being pricy, then the quantity demand would go down. 8. If the worker productivity increased as a result of training and education, the aggregate supply curve would shift to the right. 9. If the exchange rate value of the dollar increased in relation to the French currency, the euro...

Words: 285 - Pages: 2

Premium Essay

Macroeconomics

...------------------------------------------------- mACROECONOMICS RECOMMENDATION FOR OPENING A GAS STATION June 16, 2014 DeVry University June 16, 2014 DeVry University TABLE OF CONTENT Contents TABLE OF CONTENT 1 INTRODUCTION 2 ECONOMIC FACTORS 2 GROSS DEMESTIC PRODUCT 2 INTEREST RATES 3 UNEMPLOYMENT 3 BUSINESS CYCLE 4 FISCAL POLICY 5 INTERNATIONAL TRADE 5 POPULATION AND DEMOGRAPHICS 5 RECOMMENDATION 6 REFERENCES 7 INTRODUCTION Starting a successful business depends on how well you understand and research macroeconomic factors, despite the common belief that you will succeed as long as you work hard. To determine the level of risk associated with opening a new business there are several key economic factors you need to look at. These factors are Gross Domestic Product (GDP), interest rates, level of Unemployment, business cycle, fiscal policy, monetary policy, international trade, and finally population and demographics. I would like to talk a little on each of these factors followed by my recommendation ECONOMIC FACTORS GROSS DEMESTIC PRODUCT The GDP, also known as The Gross Domestic Product, is the total value of the production of goods and services in the United States (Hubbard & O’Brien, 2013). The GDP is an indicator of how well businesses are doing, in the present economy, because if companies are spending money they must also be making money. According to the Bureau of Economic Analysis, there was an...

Words: 1176 - Pages: 5

Premium Essay

Macroeconomic

...Macroeconomic Picture of Agriculture sector in Indian Economy Theodore Schultz began his acceptance speech for the 1979 Nobel Prize in Economics observing: “Most of the people in the world are poor, so if we knew the economics of being poor we would know much of the economics that really matters. Most of the world's poor people earn their living from agriculture, so if we knew the economics of agriculture we would know much of the economics of being poor” (Shultz, 1979). Existing empirical evidence on the impact of macroeconomic variables on agriculture remains mixed and inconclusive. This paper re-examines the dynamic relationship between monetary policy variables and agricultural prices using alternative vector auto regression (VAR) type model specifications. Directed acyclic graph theory is proposed as an alternative modeling approach to supplement existing modeling methods. Similar to results in other studies, this study Â’s findings show that over the time period analyzed (1975–2000), changes to money supply as a monetary policy tool had little or no impact on agricultural prices. The primary macroeconomic policy instrument that affects agricultural prices is the exchange rate, which is shown to be directly linked to interest rate, a source of monetary policy shock. The Transmission of Exchange Rate Changes to Agricultural Prices (July 2009) provides empirical evidence that price and exchange rate transmission for agricultural products is low in most developing...

Words: 670 - Pages: 3

Premium Essay

Macroeconomics

...Macroeconomics Jennifer Swanson Professor Hector Morales 12/09/2012 Macroeconomics……………………….………………….………………………... page 3 Conclusion………………………………………………………………………....... page 4 References………………………………………………………………………....... page 5 Macroeconomics The macroeconomic situations in the United States are worrisome, as is the rest of the world. Unemployment is at a steady high, there’s a staggering inflation and the recession continues to effect people after so many years. The 2008 Financial Crisis had a more detrimental impact on advanced economies like the US than on developing economies like China and India, leading to wider projected disparities between the future GDP growth rates of the advanced and developing economies. According to Trading Economics, “The Gross Domestic Product (GDP) in the United States expanded 2.70 percent in the third quarter of 2012 over the previous quarter. Historically, from 1947 until 2012, the United States GDP Growth Rate averaged 3.2 Percent reaching an all-time high of 17.2 Percent in March of 1950 and a record low of -10.4 Percent in March of 1958.Unemployment Rate in the United States decreased to 7.70 percent in November of 2012 from 7.90 percent in October of 2012”. The recovery of the US job market has not taken off as many had expected and recently the economy added a disappointing number of available jobs. With the lack of jobs, unemployment rates continue to be an issue. The economy has lost more jobs...

Words: 533 - Pages: 3

Premium Essay

Macroeconomics

...Macroeconomic Theory Macroeconomic Theory A Dynamic General Equilibrium Approach Michael Wickens Princeton University Press Princeton and Oxford Copyright © 2008 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, 3 Market Place, Woodstock, Oxfordshire OX20 1SY All Rights Reserved ? A catalogue record for this book is available from the British Library This book has been composed in Times and typeset by T&T Productions Ltd, London Printed on acid-free paper press.princeton.edu Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ∞ Contents Preface 1 Introduction 1.1 Dynamic General Equilibrium versus Traditional Macroeconomics 1.2 Traditional Macroeconomics 1.3 Dynamic General Equilibrium Macroeconomics 1.4 This Book The Centralized Economy 2.1 Introduction 2.2 The Basic Dynamic General Equilibrium Closed Economy 2.3 Golden Rule Solution 2.3.1 The Steady State 2.3.2 The Dynamics of the Golden Rule 2.4 Optimal Solution 2.4.1 Derivation of the Fundamental Euler Equation 2.4.2 Interpretation of the Euler Equation 2.4.3 Intertemporal Production Possibility Frontier 2.4.4 Graphical Representation of the Solution 2.4.5 Static Equilibrium Solution 2.4.6 Dynamics of the Optimal Solution 2.4.7 Algebraic Analysis of the Saddlepath Dynamics 2.5 Real-Business-Cycle Dynamics 2.5.1 The Business Cycle 2.5.2 Permanent Technology Shocks 2.5.3 Temporary...

Words: 188884 - Pages: 756

Premium Essay

Macroeconomics

...Introduction In this paper is analyzing the business idea of cousin Edgar to invest in four gas stations in U.S. After conducting researches and analyzing information, there are factors that Cousin Edgar might need to consider before the investment and start up the business. Firstly, the country’s economy health needs to be examined, whether the microeconomic factors, such as the level of demand in gasoline, monthly and a year and the factors that influencing supply of gasoline. Subsequently, macroeconomic factors determine the business idea in producing high profit, and also determining the business span in the short run or even in the long run. Macroeconomic analyzes in oil price According to The World Bank (2014) the total macroeconomic impact of the U.S. oil and natural gas industry is significant. Moreover, the industry was directly and indirectly responsible for over $1 trillion of value- added, or 7.7% of Gross Domestic Product (GDP). Essentially the estimation that the oil and natural gas industry’s total impact on labor income in 2009 was $534 billion (including benefits), which flow to 9.2 million Americans in jobs directly or indirectly in the industry or in jobs supported by those in the industry. In 2007, it is estimated that the industry directly and indirectly contributed approximately $280 billion of revenue to federal, state and local governments. The industry’s impact goes beyond the operations of the companies actively engaged in exploration and...

Words: 1033 - Pages: 5