ATMs and credit cards
This problem examines the effect of the introduction of ATMs and credit cards on money demand. For simplicity, let’s examine a person’s demand for money over a period of four days. Suppose that before ATMs and credit cards, this person goes to the bank once at the beginning of each four-day period and withdraws from her savings account all the money she needs for four days. Assume that she needs $4 per day.
a. How much does this person withdraw each time she goes to the bank? Compute this person’s money holdings for days 1 through 4 (in the morning, before she needs any of the money she withdraws).
b. What is the amount of money this person holds, on average?
Suppose now that with the advent of ATMs, this person withdraws money once every two days.
c. Recompute your answer to part (a).
d. Recompute your answer to part (b).
Finally, with the advent of credit cards, this person pays for all her purchases using her card. She withdraws no money until the fourth day, when she withdraws the whole amount necessary to pay for her credit card purchases over the previous four days.
e. Recompute your answer to part (a).
f. Recompute your answer to part (b).
g. Based on your previous answers, what do you think has been the effect of ATMs and credit cards on money demand?
. Suppose that current money supply is $8,000. The required reserve ratio is 0.2 The Fed wishes to decrease the money supply by $600. Determine the following: All underlying work must be shown
a. What open market operations would the Fed have to take to achieve the stated desired change in the money supply?
c. How much should the Fed buy or sell in the government bonds to achieve the stated desired change in the money supply.
d. What would the money supply in the economy as the result of the Fed action be?
Name the mobile manufacturing company that has recently partnered withAirtel and BSNL to set up 5G internet speed in India to introduce a fast internet ecosystem in the country.
consider an economy with the following components of aggregate expenditure: Consumption function: C20 +0.8Y Investment function: I = 30 Government expenditures G = 8 Export function X=4 Import function: M=2 + 0.2Y. There are no taxes so YD = Y.
whta is the marginal propensity to consume inthis economy?
American financial magazine Barron's has listed the HDFC Bank Managing Director's name on 23rd position in the list of world’s 30 best CEOs. His name is....
A) Aditya Puri
B) Sanjeev Misra
C) M K Sharma
D) Shikha Singh
Where was electricity supply first introduced in India
Which of the following policies of the financial sectors is basically designed to transfer local financial assets into foreign financial assets freely and at market determined exchange rates?
A) Capital Account Convertibility
B) Financial Deficit Management
C) Mimimum Support Price
D) Restrictive Trade Practices
National Income estimates in India are prepared by
A) Planning Commission
B) Reserve Bank of India
C) Central statistical organisation
D) Indian statistical Institute
Suppose that a person’s wealth is $50,000 and that her yearly income is $60,000. Also suppose that her money demand function is given by
Md = $Y (.35 - i )
a. Derive the demand for bonds. Suppose the interest rate increases by 10 percentage points. What is the effect on the demand for bonds?
b. What are the effects of an increase in wealth on the demand for money and the demand for bonds? Explain in words.
c. What are the effects of an increase in income on the demand for money and the demand for bonds? Explain in words.
d. Consider the statement “When people earn more money,they obviously will hold more bonds.” What is wrong with this statement?
Suppose that a person’s yearly income is $60,000. Also suppose
that this person’s money demand function is given by
Md = $Y (.35 - i )
a. What is this person’s demand for money when the interestrate is 5%? 10%?
b. Explain how the interest rate affects money demand.
c. Suppose that the interest rate is 10%. In percentage terms,what happens to this person’s demand for money if heryearly income is reduced by 50%?
d. Suppose that the interest rate is 5%. In percentage terms,what happens to this person’s demand for money if heryearly income is reduced by 50%?
e. Summarize the effect of income on money demand. In percentage terms, how does this effect depend on the interestrate?
Suppose that the economy is characterized by the following
C = 160 + 0.6YD
I = 150
G = 150
T = 100
Solve for the following variables.
a. Equilibrium GDP (Y)
b. Disposable income (YD)
c. Consumption spending (C)
Which Organisation publishes the “Fiscal Monitor” report?
a) World Economic Forum
b) World Bank
c) International Monetary Fund
d) Reserve Bank of India