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[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