Answer:
5
Explanation:
15 - 10 = 5
Answer:
a) Assets: Reserves $200,000; Liabilities: Deposits $200,000
b) Amount Deposited: $2000,000; Change in Excess Reserves: $190,000; and Change in Required Reserves: $10,000
c) See the calculation below and the attached excel file for the table.
d) the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.
Explanation:
These can be answered as follows:
a) Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).
Note: See the attached excel file for the table.
The $200,000 deposited by Lorenzo to First Main Street Bank led to the creation of both an asset and a liability for First Main Street Bank.
As a result, the reserve of the bank is increased by $200,000 on the asset side of the T-account. It is therefore now possible for the ban to grant loan to other customers from these additional reserves.
In addition, the demand deposit of the bank is increased by $200,000 on the liability side of the T-account. This is recorded as a demand deposit because it is possible for Lorenzo to come at any time to the band to withdraw his deposit either by using a debit card or by writing a check.
b) Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 5%. Hint: If the change is negative, be sure to enter the value as negative number.
Note: See the attached excel file for the table. Just scroll the excel file down to part b.
The required reserve ratio of 5% indicates that First Main Street Bank has to hold 5% of the $200,000 the deposit or fresh fresh reserves, and this will result in having a 95% excess reserve which the bank can employ to grant loans.
From the amount deposited, the change in excess reserve and the change in the required reserve can be computed as follows:
Amount deposited = $200,000
Change in excess reserve = $200,000 * (1 - 5%) = $190,000
Change in required reserve = $200,000 * 5% = $10,000
c) Now, suppose First Main Street Bank loans out all of its new excess reserves to Juanita, who immediately uses the funds to write a check to Gilberto. Gilberto deposits the funds immediately into his checking account at Second Republic Bank. Then Second Republic Bank lends out all of its new excess reserves to Lorenzo, who writes a check to Neha, who deposits the money into her account at Third Fidelity Bank. Third Fidelity lends out all of its new excess reserves to Teresa as well.Fill in the following table to show the effect of this ongoing chain of events at each bank. Enter each answer to the nearest dollar.
Note: See the attached excel file for the table. Just scroll the excel file down to part c.
As already computed in part b above, we have the following to show the effect of this ongoing chain of events at each bank, we have:
For First Main Street Bank:
Increase deposit = Deposit from Lorenzo = $200,000
increase in required reserve = $200,000 * 5% = $10,000
Increase in loans = Loan to Juanita = $200,000 * (1 - 5%) = $190,000
For Second Republic Bank:
Increase deposit = Deposit from Gilberto = $190,000
Increase in required reserve = $190,000 * 5% = $9,500
Increase in Loans = Loans to Lorenzo = $190,000 * (1 - 5%) = $180,500
For Third Fidelity Bank:
Increase deposit = Deposit from Neha = $180,500
Increase in required reserve = $180,500 * 5% = $9,025
Increase in Loans = Loans to Teresa = $180,500 * (1 - 5%) = $171,475
d) Assume this process continues, with each successive loan deposited into a checking account and no banks keeping any excess reserves. Under these assumptions, the $200,000 injection into the money supply results in an overall increase of in demand deposits.
In order to calculate this, the formula for the money multiplier is used to multiply the initial deposit or injection of $200,000 by Lorenzo as follows:
Money multiplier = 1/r
Where r denotes required reserve ratio of 5%, or 0.05.
Therefore, we have:
Overall increase in demand deposits = Injection * (1 / r) = $200,000 * (1 / 0.05) = $200,000 * 20 = $4,000,000
Therefore, the $200,000 injection into the money supply results in an overall increase of $4,000,000 in demand deposits.
When the Federal Reserve buys a government bond from a client of First Main Street Bank, the bank's assets increase by the bond value and its liabilities increase by the same amount in deposits.
In this scenario, when the Federal Reserve buys a $200,000 government bond from Lorenzo, a client of First Main Street Bank, and he deposits the money into his checking account at the bank, there are changes in the bank's T-account. The bank's assets increase by $200,000 in reserves, while its liabilities increase by $200,000 in deposits.
Next, if First Main Street Bank loans out all of its new excess reserves to Juanita, who writes a check to Gilberto, Gilberto deposits the funds into his checking account at Second Republic Bank. This process continues with each successive loan deposited into a checking account at each bank. The increase in deposits, required reserves, and loans at each bank can be filled in the table provided.
Assuming this process continues with no banks keeping any excess reserves, the $200,000 injection into the money supply results in an overall increase of $200,000 in demand deposits.
#SPJ3
Answer:
The weighted average contribution margin per unit is $131.32.
Explanation:
The total combined sales of both the products equal, 6300 + 3900 = 10200
The weightage of each product in sales mix is,
Silver = 6300 / 10200
Gold = 3900 / 10200
The weighted average contribution margin can be calculated by multiplying the per unit contribution of each product with their respective weights.
Weighted average unit CM = 6300/10200 * 95 + 3900/10200 * 190
Weighted average unit CM = $131.32
B. $23,800 net increase in operating income if the ceiling fans are sold as is.
C. $23,800 net increase in operating income if the ceiling fans are repaired.
D. $9,860 net increase in operating income if the ceiling fans are sold as is.
Answer:
A. $9,860 net increase in operating income if the ceiling fans are repaired.
Explanation:
If the company don't do anything with defective fans, they still occurs manufacturing cost of $20,060 (=$59 * 340)
(1) if the company sell defective units, operating income is -12,240 or loss of $12,240 =(340*$23-$20,060)
(2) if the company process further for a cost of $41 each and then sell for the normal selling price, the operating income is -2,380 loss of $2,380= 340*($93-$41) - $20,060
So if the fans are repaired, the net increase in operation income is $9,860 =(-2,380-( -12,240))
Answer:
Explanation:
Monetary policy tightening decreases money supply and increases interest rate. Higher interest rate lowers investment, which will decrease aggregate demand. AD curve will shift to left, decreasing both price level and real GDP, giving rise to a recessionary gap in short run. Inflation will decrease and unemployment will increase.
In the long run, lower price level will decrease wages and prices of inputs, decreasing production costs. Firms will increase production, increasing aggregate supply. SRAS shifts rightward, intersecting new AD curve at further lower price level but restoring real GDP to potential GDP GDP.
When aggregate demand falls, AD curve will shift leftward from AD0 to AD1, intersecting SRAS0 at point B with lower price level P1 and lower real output Y1, with short run recessionary gap of (Y0 - Y1). In long run, SRAS0 shifts right to SRAS1, intersecting AD1 at point C with further lower price level P2 and restoring real GDP to potential GDP level Y0. Inflation will decrease and unemployment will decrease & restore to initial (full employment) level.
Answer:
B. Expected Return and Beta
Explanation:
The security market line displays the expected return of an individual asset as a function of it systematic risk (the diversifiable risk) as identified by beta if an asset is correctly priced it lies on the SML and if it lies above the SML it is undervalued because they yield a higher return for a given amount of risk and if it lies below the SML it is overvalued because for a given amount of risk it yield a lower return.