Refer to the given data. Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20 percent to:
Answer the question on the basis of the following consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All figures
are in billions and each question should be answered independently of changes specified in all
preceding ones.
A. 10 percent.
B. 12 percent.
C. 14 percent.
D. 15 percent.
A. 10 percent
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People are forced to economize because of
A. competition. B. pressure to conform. C. scarcity. D. the absence of money.
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Refer to the scenario above. What is Wendy's opportunity cost of producing one earring?
A) 0.33 greeting cards B) 0.50 greeting cards C) 1 greeting card D) 2 greeting cards
In the Keynesian model in the short run, an increase in the money supply will cause
A. an increase in the real interest rate and an increase in output. B. an increase in output and a decrease in the real interest rate. C. a decrease in the real interest rate but no change in output. D. no change in either the real interest rate or output.