OPTIONS:
1: take away from// add to
2: amplify//dampen
3: expansion of income//expansion of deposits//depositmultiplier//simple multiplier
4: are increased//are reduced
5: dampens//amplifies
6: expansion of deposits//deposit multiplier//simplemultiplier//expansion of income
Options 1 Take Away From Add To 2 Amplify Dampen 3 Expansion Of Income Expansion Of Deposits Deposit Multiplier 1 (69.96 KiB) Viewed 14 times
There is a striking similarity between the simple multiplier and the deposit multiplier. a. Suppose the marginal propensity to spend out of GDP, z, is 0.7. If autonomous spending increases by $3,000, fill in Table 1 to the right. (Round your responses to the nearest dollar.) b. The sum of the values in the third column should be: AY = $3,000 + (0.7) × $3,000 + (0.7)² × $3,000 +... The total change in GDP for this situation is $ 10000 (Round your responses to the nearest cent.) c. Now consider the process of deposit creation from this chapter. Consider a new deposit of $3,000 and a target reserve ratio, v, of 0.20 (with no cash drain). Fill in the new table, Table 2. (Round your responses to the nearest dollar.) d. The sum of the values in the first column should be: AY = $3,000 + (1 -0.20) × $3,000 + (1 -0.20)² × $3,000 + ... The total change in deposits in this situation is $ 15000 (Round your responses to the nearest cent.) e. Explain why taxes and imports for the simple multiplier are similar to a reserve ratio for the deposit multiplier. Taxes and imports 1 each successive round of spending, and thus 2 the 3 follows an initial increase in autonomous spending. In the same way, the successive reserves held by commercial banks 4 6 for each new deposit that can be loaned out, and thus 5 ▼the that First Second Third Fourth Round Round First Second Third Fourth Table 1 ΔΑΕ $3,000 $ 2100 $ 1470 $ 1029 AY $3,000 $ 2100 $ 1470 $ 1029 Table 2 ADeposits AReserves ALoans $3,000 $2,400 $ 2400 $ 1920 $ 1536 $ 1920 $ 1536 $ 1229 $600 $ 480 $ 384 $ 307
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!