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Klio2033 [76]
3 years ago
10

The Federal Reserve purchases ​$8 million in U.S. Treasury bonds from a bond​ dealer, and the​ dealer's bank credits the​ dealer

's account. The required reserve ratio is 19 ​percent, and the bank typically lends any excess reserves immediately. Assuming that no currency leakage occurs, calculate how much will the bank be able to lend to its customers following the Feds purchase $______million.
Business
1 answer:
Zinaida [17]3 years ago
6 0

Answer:

The bank will be able to lend:

$42,105,263 ($8 million/ 0.19)

Explanation:

The above amount which the bank can lend from the $8 million received from the Federal Reserve for a customer is a function of $8 million deposit in a customer's account and the reserve ratio.  This is called the money multiplier.

The money multiplier is the amount of money that banks generate with each dollar of reserves. Reserves is the amount of deposits that the Federal Reserve requires banks to hold and not lend.  The level of Reserves and deposit liabilities determine the amount a bank can lend out.

The process by which banks create more money than the physical money is called money creation.  This shows that a bank creates more money in the economy through its lending activities.

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3 years ago
Read 2 more answers
If real income rises 4%, prices rise 1%, and nominal money demand rises 4%, what is the income elasticity of real money demand?
goblinko [34]

The income elasticity of real money demand d. 3/4

Increase in real money demand = Increase in nominal money demand - Increase in inflation = 4% - 1% = 3%

Income elasticity of real money demand = % increase in real money demand / % increase in real income

= 3% / 4%

= 3/4

Income elasticity of demand is a monetary measure of how responsive the amount of demand for a very good or provider is to trade-in earnings. The formulation for calculating earnings elasticity of demand is the percentage change in quantity demanded divided by using the percent change in earnings.

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5 0
1 year ago
Managers who have the ability to understand, alter, lead, or control the behavior of others are said to possess ______ skills.
d1i1m1o1n [39]

Answer:

Managers who have the ability to understand, alter, lead, or control the behavior of others are said to possess human skills.

What is Human Skills?

having knowledge about and being able to work with people.

What is Skills?

the ability to use one's knowledge and competencies to accomplish a set of goals and objectives.

skills vs Skills.

skills refers to the general term, while Skills refer to the formal term "Skill Approach"

8 0
2 years ago
J Corp. common stock is priced at $36.50 per share. The company just paid its $0.50 quarterly dividend. Interest rates are 6.0%.
viva [34]

Answer:

Explanation:

The time (T) = 6 months = 6/12 years  = 0.5 years

Interest rate (r) = 6% = 0.06

The stock is priced [S(0)] = $36.50

The price the stock sells at 6 months (V_c) = $3.20

European call (K) = $35

The price (P) is given by:

P=V_c+K.e^{-rT}-S(0)+Dividends\\But, Dividends = 0.5*e^{-0.25*0.06}+ 0.5*e^{-0.5*0.06}\\Therefore, P=V_c+K.e^{-rT}-S(0)+0.5*e^{-0.25*0.06}+ 0.5*e^{-0.5*0.06}\\Substituting:\\P=3.2+35*e^{-0.06*0.5}-36.5+0.5*e^{-0.25*0.06}+ 0.5*e^{-0.5*0.06}\\P=3.2+33.9656-36.5+0.4926+0.4852\\P=1.64

The price of a 6-month, $35.00 strike put option is $1.65

5 0
3 years ago
The State of Alabama Board of Tourism ran a series of ads showing traditional families enjoying various attractions in the state
horrorfan [7]

Answer:

B) demographic

Explanation:

Demographic segmentation refers to defining (or segmenting) a specific target market based on demographic variables such as gender, age, income, family status, marital status, education, ethnicity, religion, etc.

Since the Alabama Board of Tourism showed "traditional" families, it is obviously targeting families with their adds, and family status is one of the demographic variables.

7 0
3 years ago
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