ECON E 202 – Calculate the Labor Force and Unemployment Rate

Subject: Economics    / General Economics
Question
INTRODUCTION TO MACROECONOMICS
HOMEWORK # 4
17 points possible
NAME __________________________________
1. a. In the diagram below, assume the prevailing real wage rate is 5. Calculate the
Labor Force _____________ Unemployment Rate _____________ b. Suppose that some of the unemployed become discouraged workers. Illustrate the
effect on labor supply and/or labor demand in the diagram.
2. Suppose that I make a deposit of $10,000 into NBD. Assume the minimum required
reserve ratio set by the Fed is .125.
a. Fill in the balance sheet below assuming that NBD does not loan out any of the
new deposit
ASSETS LIABILITIES TR
Loans DD b. If NBD wishes to have a reserve ratio of 30%, how much
should it lend out? _______________ c. What is the maximum amount that NBD can lend out without
violating its required reserve ratio?
_______________ d. Fill in NBD’s balance sheet after it has lent out the amount you listed in b.
ASSETS LIABILITIES TR
Loans DD e. Suppose that the borrower keeps the cash. What is the
money supply?
f. _______________ Suppose that the borrower deposits the amount listed in b in Citizen’s Bank. Fill
in Citizen’s Bank’s balance sheet before it makes any loans.
ASSETS LIABILITIES TR
Loans DD g. How much will Citizen’s Bank’s lend out if its reserve ratio
is .3? ______________ h. What is the reserve ratio for the banking system after Citizen’s
Bank receives the deposit but before it makes any loans?
______________
i. Suppose that Citizen’s Bank lends out the amount you listed
in g and that the dollars loaned are deposited into a third bank.
What is the system-wide reserve ratio before the third bank
makes any loans?
_____________
3. Using your figures from question 2, and assuming that the public holds no currency
and that all of the banks wish to have a reserve ratio of .3, what are the long-run
values of
a. Money supply
b. Reserves 4. ______________
______________ Again, use your figures from question 2, and assumed that the public holds no
currency. But now, all of the banks wish to have a reserve ratio of .125. What are the
long-run values of
a. Money supply
b. Reserves 5. ______________
______________ What is the value of the money multiplier when each bank
has a reserve ratio of .125? ______________