Was the money multiplier stable during the Great Recession? Why would an unstable money multiplier pose a problem for monetary policy?
What will be an ideal response?
The money multiplier was not stable during the Great Recession. The money multiplier declined sharply, because the currency—deposit ratio and especially the reserve—deposit ratio both rose dramatically, as people increased their demand for currency, and banks increased their demand for excess reserves. Instability in the money multiplier creates instability in the money supply for a given monetary base.
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Under a fixed exchange rate system, at low domestic real interest rates net capital outflows are ________, so the central bank ________ foreign-exchange reserves
A) positive; acquires B) positive; loses C) negative; acquires D) negative; loses
In a capitalist market economy, recessions and inflation can occur because of coordination failures
a. True b. False Indicate whether the statement is true or false
The GDP deflator of an economy is calculated by:
a. dividing nominal GDP by real GDP and multiplying by 100. b. dividing real GDP by nominal GDP and multiplying by 100. c. dividing nominal GDP by real GDP and multiplying by 1,000. d. dividing real GDP by nominal GDP and multiplying by 1,000.
Under the current Social Security system, married persons may draw benefits based on
a. only their own earnings. b. their own earnings or draw 50 percent of the benefits earned by their spouse. c. their own earnings plus 50 percent of their spouse's earnings. d. their own earnings plus 100 percent of their spouse's earnings.