Other things the same, if banks decide to hold a smaller part of their deposits as excess reserves, the money supply will fall
a. True
b. False
Indicate whether the statement is true or false
False
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Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week
Using the method of average values, the absolute price elasticity of demand is A) 1.4. B) 0.8. C) 3.0. D) 1.75.
Assume the Fed initiates an expansionary monetary policy that is correctly anticipated by economic agents in the economy. According to the rational expectation hypothesis, the result is
A) an increased price level in the short run, but no effect on price level in the long run. B) decreased real Gross Domestic Product (GDP) in the short run, but increased real Gross Domestic Product (GDP) in the long run. C) increased real Gross Domestic Product (GDP) and increased employment in the long run. D) an increased price level, but no change in real Gross Domestic Product (GDP) in the long run.
If the money multiplier is approximated to be 10, it means:
A. banks create 10 dollars in deposits from each original deposit of a dollar. B. banks create approximately 10 times the amount of cash in the economy. C. the economy overall has 10 times the amount of deposits as existing cash. D. All of these are true.
Durable consumer goods are goods that last more than
A. three years. B. five years. C. seven years. D. one year.