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Economics 304 Homework - Lesson 7 - The Fed and the Money Supply Correct Answers

Analysis of the Federal Reserve and money supply mechanisms with correct answers.

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1Economics 304 Homework-Lesson 7-The Fed and the Money SupplyCorrect Answers90 points total:Instructions:Please show all work or points will be taken off. Good luck!1. (35 points total) In this problem, we are going to calculate the moneymultiplier oneyear prior to the Great Recession (12/2006) and compare it to the money multiplier fiveyears hence (12/2011).The implication as you may have guessed is that since the Fedhas been paying interest on excess reserves (10/2008), the excess reserve to deposit ratiohas risen which implies a lower money multiplier.1To do so, wewill use the datafrom FRED (Federal Reserve Economic Data).Note, after clicking on hyperlink, lookto the upper left and click on "view data" to retrieve the data that you need to do theproblem.To make sure we are on the 'same page,'the amount of excess reserves inDecember, 2006 is $1.862 billion (we are using beginning of month data).Data you need forproblem 1:Monetary Base2006-12-01837.7012011-12-012603.613Excess Reserves12/06 1.86212/111502.318Currency2006-12-01749.52011-12-01999.8Required Reserves2006-12-0141.4202011-12-0196.514Demand Deposits2006-12-01610.8

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Document Details

University
University of Texas
Course
ECO 304
Subject
Economics

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