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Liberty University ECON214 Problem Set 5 Complete Solutions Correct Answers Key

A solved Problem Set 5 for ECON214, covering essential economic calculations.

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ECON 214Liberty University ECON214Problem Set5complete solutions correct answers key1)What are the three functions of money?Which function is the defining characteristic?2)How is the discount rate different from the federal funds rate?3)Consider the balance sheet for the Wahoo bank as presented below.Wahoo Bank Balance SheetAssetsLiabilitiesgovernmentsecurities$1,600Liabilities:Checkingaccounts$4,000RequiredReserves$400Net Worth$1,000ExcessReserves$0Loans$3,000Total Assets$5,000TotalLiabilities$5,000Using a required reserve ratio of 10% and assuming that the bank keeps no excess reserves, writethe changes to the balance sheet for each of thefollowing scenarios:a.Bennettwithdraws $200 from his checking account.b.Roland deposits $500 into his checking account.c.The Fed buys $1,000 in government securities from the bank.d.The Fed sells $1,500 in government securities to the bank.4) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, whichof the following scenarios produces a larger increase in the money supply, explain why.a) Someone takes $1000 from under his or her mattress and deposits it into a checking account.b) The Fed purchases $1,000 in government securities from a commercial bank.5) Using a required reserve ratio of 10% and assuming that banks keep no excess reserves, whatis the value of government securities the Fed must purchase if it wants to increase the moneysupply by $2 million?

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Document Details

University
Liberty University
Course
ECON 214
Subject
Economics

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