Economics-AW107

Economics-AW107 Online Services

 

Money and Banking

 

Question #1 (28 Points)
 
a. Suppose that the reserve requirement is 8%. If the Fed buys $1 million in bonds from the First national Bank, what is the total deposit creation in the banking system using the simple deposit multiplier? (7 Points)
 
b. Suppose that the reserve requirement is 6%. If the Fed buys $1 million in bonds from the First national Bank and the currency ratio is 33% and the excess reserve ratio is 1%, what is the change in money supply? (7 Points)
 
c. If the reserve requirement were doubled, what effect would this have on the size of the money supply? This question does not require a mathematical answer. (3 Points)
 
d. What is the difference between the discount rate and the Fed Funds rate in relation to lending? (5 Points)
 
e. What is the practical justification of the reserve requirement, besides as a monetary policy tool? (3 Points)
 
f. What are the three types of Discount Loans offered by the Federal Reserve? (3 Points)
 

Question #2 (14 Points)
 
a. Please explain how adverse selection and moral hazard apply to deposit institutions.
 
2-a-i Please explain how Federal Deposit Insurance (FDIC) could potentially create adverse selection for the managers of deposit institutions. (4 Points)
 
2-a-ii. How can information asymmetries in the bond market give professional investors an advantage over the small investor.You can use other examples if they are appropriate. (4 Points)
 
b. These questions concentrate on the game theory of money and banking.Consider the Principle-Agent problem in relation to banking.A person is a Vice-President of a Bank, serving as the head of Commercial Lending. They receive a substantial bonus based on the volume and profitability of their department. The department both makes loans and collects the loans. Answer the following questions using this information.
 
2-b-i. Simply identify the Principal and the Agent in this problem? (3 Points)
 
2-b-ii. What is the moral hazard Problem regarding the Vice-President and his bonus? (3 Points)
 
You can read more about our case study assignment help services here.
 

How it Works

How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention Case Id mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with Case Id in the email body. Case Id is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

Step 2:- While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to Case Id . The date is asked to provide deadline.

Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

Case Approach

Scientific Methodology

We use best scientific approach to solve case study as recommended and designed by best professors and experts in the World. The approach followed by our experts are given below:

Defining Problem

The first step in solving any case study analysis is to define its problem carefully. In order to do this step, our experts read the case two three times so as to define problem carefully and accurately. This step acts as a base and help in building the structure in next steps.

Structure Definition

The second step is to define structure to solve the case. Different cases has different requirements and so as the structure. Our experts understand this and follow student;s university guidelines to come out with best structure so that student will receive best mark for the same.

Research and Analysis

This is the most important step which actually defines the strength of any case analysis. In order to provide best case analysis, our experts not only refer case materials but also outside materials if required to come out with best analysis for the case.

Conclusion & Recommendations

A weak conclusion or recommendations spoil the entire case analysis. Our expert know this and always provide good chunks of volume for this part so that instructors will see the effort put by students in arriving at solution so as to provide best mark.

Related Services

 

Question #3 (27 Points)
 
3-a-i. What is the difference between a bank that is insolvent and one that is illiquid? Consider the issue of retained earnings (2 Points)
 
3-a-ii. Draw the loanable funds framework, identify the two axes, and the supply and demand curves). (6 Points)
 
a-iii. Why are banks restricted in the assets that they can own? For example, why do you think banks are prohibited from owning common stock? Consider the concept of Glass Steagull. (6 Points)
 
c. In one paragraph or less, explain why bank owners might like to employ business strategies that generate a high ROA and a high asset-to-equity ratio? Why might depositors prefer strategies that lead to low ROA and low asset to equity ratios? (7 Points)
 
d. Why is the business goal of having high levels retained earnings? How can high levels of retained earnings be contrary to the investors goals? (6 Points)
 

Question #4 (15 Points)
 
Given a required reserve ratio is 10%. Assume that the banking system has excess reserves equal to $2 billion. Further, the currency in circulation equals $425 billion, and the total amount of demand deposits equals $900 billion. Based on these numbers, calculate
 
(a) required reserves held by the banking system (3 Points)
 
(b) total reserves held by the banking system (3 Points)
 
(c) monetary base (3 Points)
 
(d) total money supply (M1) (3 Points)
 
(e) the money multiplier (3 Points)
 
Question #5 (12 Points)
 
Consider this Table and the equation of exchange of MV = PY (you can rewrite it as
 

Assume P =1

2001 2002 2003

Ms 100 110 121
Y 1000 1210 1390

 

5-a-i Calculate velocity for each year. At what rate is velocity growing? (6 Points)
5-a-ii In the face of constant velocity, explain what happens to aggregate demand if the growth rate of money is less than the rate of inflation ? (6 Points)

 
Question #6 (22 Points)
 
According to Interest Rate Parity, how would the dollar respond (appreciate, depreciate, no change) against the Euro in reaction to an average European inflation rate of 4%? The US inflation rate is 2% in this example. (5 Points)
 
Consider the relationship between contractionary monetary policy. the value of the dollar, and net imports.
 
B. How does US expansionary monetary policy affect the value of the dollar (holding foreign money supplies constant)? (3 Points)
 
C. How does this new dollar value impact net exports? (4 Points)
 
D. Do these two work with each other in regards to economic growth? Explain. (3 Points)
 
E. Suppose the current exchange rate is $1 buys .8644Euro, and key interest rates in the US are at 1% while they are at 3.5% in Europe for a one year bond.
 
a. What is the expected value of the Euro in a year using the interest rate parity
equation? (4 Points)
 
b. If the US Federal Reserve raises interest rates, how would you expect the Euro to move (appreciate or depreciate)? (3 Points)
 

Question #7 (11 Points)
 
These questions refer to the readings assigned in the syllabus.
 
A. Using the Wizard of Oz paper, how can the absence of fiat money result in deflation and economic distress? You must use the concept of Money Demand in this answer. (6 Points)

 
B. In the Merchant of Venice paper, how did Shakespeare use Portia to represent a Capital Good? (5 Points)

 
Product code: Economics-AW107
 
Looking for best Economics-AW107 online ,please click here
 

Summary