What happens to M1 and M2 due to each of the following changes?
(a) You take $500 out of your checking account and put it into a passbook savings account.
(b) You take $1000 out of your checking account and buy traveler's checks.
(c) You take $1500 out of your money—market mutual fund and deposit into your checking account.
(d) You cash in $2000 in savings bonds and invest the money in a certificate of deposit.
(a) M1 falls $500, M2 is unchanged (remember that M1 is part of M2).
(b) M1 and M2 are both unchanged.
(c) M1 rises $1500, M2 is unchanged.
(d) M1 is unchanged, M2 rises $2000.
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The above figure shows the marginal private benefit and marginal social cost of a college education. If students receive a $10,000 voucher
A) no students will go to college. B) less than 10 million students will go to college. C) 10 million students will go to college. D) more than 10 million students will go to college.
Real GDP
a. is nominal GDP adjusted for changes in the price level. b. is also called nominal GDP. c. measures GDP minus depreciation of capital. d. will always change when prices change.
If the Fed reduces the money supply, banks will often initially have
a. more reserves than they are required to hold b. excess reserves c. increased demand deposits d. fewer loans than normal e. deficient reserves
The basic formula for the price elasticity of demand coefficient is:
A. absolute decline in quantity demanded/absolute increase in price. B. percentage change in quantity demanded/percentage change in price. C. absolute decline in price/absolute increase in quantity demanded. D. percentage change in price/percentage change in quantity demanded.