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vivado [14]
2 years ago
7

Assume that banks hold no excess reserves and that all currency is deposited into the banking system. If the required reserve ra

tio is 5.00%, and the Federal Reserve wants to increase the money supply by $55.00 million, the Fed would need to make an open market purchase of $________ million. (Insert your answer in millions, and round to two decimal places.)
Business
1 answer:
GrogVix [38]2 years ago
3 0

Answer:

2.75 million

Explanation:

Required reserves is the percentage of deposits required of banks to keep as reserves by the central bank

Required reserves = reserve requirement x deposits

Increase in value of money supply as a result of the purchase is determined by the money multiplier

Money multiplier = 1 / reserve requirement

1/0.05 = 20

increase in money supply = amount of open market purchase / reserve requirement

55  / 20 = 2.75 million

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Mike, a minor, buys some real estate as an investment. The contract obligates Mike to make monthly installment payments for 10 y
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3 years ago
The current research on managerial skill points to four general management skills. Which of the following is NOT one of the four
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3 years ago
g Suppose that if GSI drops the price on the Glucoscan 3000 immediately, it can increase sales over the next year by 30% to 130,
Amanda [17]

Complete Question:

Glucose Scan Incorporated (GSI) currently sells its latest glucose monitor, the Glucoscan 3000, to diabetic patients for $129. GSI is considering lowering the sale price to $99 per unit. The cost of goods sold for each Glucoscan unit is $50, and GSI expects to sell 100,000 units over the next year. The marginal corporate tax rate is 40%. Suppose that if GSI drops the price on the Glucoscan 3000 to $99 immediately, it can increase sales over the next year by 30% to 130,000 units.

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Incremental Earnings Before Interest and Tax Analysis  

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Units Sold                                        100,000                         130,000

Unit sales price                            <u>       129          </u>                <u>         99        </u>

Sales Revenue                             $12,900,000                 $12,870,000

Cost of Goods sold at $50            <u>5,000,000</u>                  <u>$6,500,000</u>

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G. Profit on Strips sold at $75      <u>$7,500,000</u>                  <u>$9,750,000</u>

Total Gross Profit for the year      $15,400,000                $16,120,000

The Net benefit of this price change is increase of Earnings before interest and tax by $720,000.

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