Download [MT445 | Managerial Economics] Unit 9 Assignment Student Name

[MT445 | Managerial Economics]
Unit 9 Assignment
Student Name: Jeremiah LaPlante
Please answer the following questions. Submit as a Microsoft Word® document to the
Dropbox when completed.
1. Determine whether each of the following is counted in the M1 measure of the money supply:
i.
The coins in your piggy bank. Yes since this is considered currency.
ii. The funds in your checking account at First National Bank.
Yes the value of the checking account is also included
iii. The funds in your savings account at Second National Bank.
This is included in M2 not M1.
iv. The traveler’s check you have left over from your trip to Germany.
This is included in M1.
v. The available balance on your Citico Gold MasterCard. No this is in M2
2. Refer to the simplified balance sheet for a bank and answer the following questions.
Assets
Liabilities
Reserv
es
$
10,000
Deposits
$
70,000
Loans
$
66,000
Stockholder's
equity
$
6,000
a. If the required reserve ratio is 5 percent, how much in excess reserves does this bank hold?
6500
[MT445 | Managerial Economics]
b. What is the maximum amount this bank can expand its loans? 6500
c. What will happen to the M1 money supply if it makes the loans in (b) above and those funds
are deposited into another bank by the borrowers? If deposited in another bank that banks
deposits will then increase by the amount deposited for M1, and subtract that amount from the
original bank.
3. Identify each of the following events as:
a) part of an expansionary fiscal policy
b) part of a contractionary fiscal policy
c) part of an expansionary monetary policy
d) part of a contractionary monetary policy
i.
The corporate income tax rate is increased. B
ii. Defense spending is increased. A
iii. Families are allowed to deduct all daycare expenses from their federal income taxes. C
iv. The individual income tax rate is decreased. C
v. The Federal Reserve Bank buys Treasury securities. D
4. Assume the Federal government runs a budget deficit in the current fiscal year.
[MT445 | Managerial Economics]
i. How can the Federal government fund the deficit? By selling treasury bonds to borrow
money necessary to the fund the gap between taxes and spending.
ii. If the Federal government decides to issue U.S. Treasury securities to fund the deficit, what
happens to the level of national debt, all else held constant? A lower level of investment
spending which slows the economy growth.
iii. Assuming the Federal government and firms compete for the same savers’ dollars in the
loanable funds market, what is likely to happen to interest rates? Increase
iv. Given your answer in (iii) above, is crowding out more or less likely to occur if the deficit is
funded by Treasury securities? Explain. More likely since crowding out occurs when there
is a decline in investment spending as a result of an increase in government purchases.
Directions for Submitting your Assignment
Compose your Assignment in a Microsoft Word ® document and save it as Username-MT445
Assignment-Unit#.doc (Example: TAllen- MT445 Assignment-Unit9.doc). Submit your file by
selecting the Unit 9: Assignment Dropbox by the end of Unit 9.
Unit 9 Assignment
Content and Analysis
Points
Possible
Problem #1
Determine whether each of the following is counted in the M1
measure of the money supply. (i. - v.)
10
Problem #2
Refer to the simplified balance sheet for a bank and answer the
following questions. (a – c)
6
Problem #3
Identify each of the following events as: part of an expansionary
fiscal policy, part of a contractionary fiscal policy, part of an
expansionary monetary policy, part of a contractionary monetary
policy. (i. – v.)
15
Problem #4
Assume the Federal government runs a budget deficit in the
current fiscal year. (i. – iv.)
8
Writing Style, Grammar, and APA Format.
6
Total
45
Points
Earned