Advanced Placement (AP), 31.03.2021 18:40 genyjoannerubiera

Nassim Bank is a commercial bank in Jaya with the following balance sheet (T-account). Assets Liabilities
Reserves $80,000
Demand Deposits $400,000
Government Bonds $920,000
Owners’ Equity $600,000
(a) Calculate the required reserve ratio if Nassim Bank holds no excess reserves. Show your work.

(b) The central bank of Jaya buys $20,000
of government bonds from Nassim Bank. What is the dollar value of the change in the monetary base? Explain using numbers.

(c) Based on your answer to part (a), calculate the maximum change in the money supply as a result of the central bank bond purchase after all adjustments take place in the banking system. Show your work.

(d) Given the change in the money supply in part (c), calculate the velocity of money if nominal gross domestic product changes by $500,000
. Show your work.

(e) Assume the economy of Jaya is initially at full employment. Based solely on the change in the money supply in part (c), will the price level increase, decrease, or stay the same in the short run? Explain.

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Nassim Bank is a commercial bank in Jaya with the following balance sheet (T-account). Assets Liabi...

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