Macro Economics Question

Q1: You take $1000 that you held as currency and put it into the banking system. The
reserve ratio is equal to 10%. [1.5 Marks]
1)Calculate the money multiplier.
2)By how much will increase the total amount of deposits in the banking system?
3)By how much will increase the money supply?

Q2. (Labor Force, Labor Participation Rate and Unemployment Rate). [1.5 Marks]
1)In Year 1, country A has a labor force of 100, of whom 90 are employed. The remaining 50 people in the country are not in the labor force.
Calculate the employment ratio, the labor participation rate and unemployment rate.
Over the course of the year, 10% of the employed become unemployed, while 20% of the unemployed become employed; 5% of the employed leave the labor force, while 4% of those not in the labor force become employed. The population remains unchanged.
2) Fill in the following table. (Hint: It might be helpful to draw the flow diagram before answering.)
In Year 1
In Year 2
Population
150
150
Labor Force
100
Employed
Unemployed
3) Calculate the employment ratio, the labor participation rate and unemployment rate. (Fractions suffice.)

Q3. Assume that a bank has on its asset side reserves of 1000 and loans of 6000 and on
its liability side deposits of 7000. Assume that the required reserve ratio is 10
percent. [2 Marks]
1) How much is the bank required to hold as reserves given its deposits of 7000?
2) How much are its excess reserves?
3) By how much can the bank increase its loans?

Answer:

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