Assume that the ratio of excess reserves to demand deposits is 0, and the ratio of currency to demand deposits is .2. If the reserve requirement on demand deposits is .3 and there is no reserve requirement on savings accounts, the M1 multiplier is
A) 5.5.
B) 4.
C) 2.5.
D) 2.4.
D
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The opportunity cost of increased production of some good can be measured with
A. the slope of a ray to the production possibilities curve. B. the area under the curve of a production possibilities curve. C. the area of the rectangle bounded by the axes and the point on the production possibilities curve. D. the slope of the production possibilities curve. E. All of the responses are correct.
According to the real business cycle theory, which of the following would be a real disturbance to the economy?
A) change in the required reserve ratio B) reduction in the money supply C) increase in the rate at which married women participate in the labor force D) increase in the price level
Answer the following statements true (T) or false (F)
1. If banks had $10 million in legal reserves, $110 million in check able deposits, and a 10 percent reserve requirement, they would have to reduce check able deposits by $10 million or increase reserves by $1 million. 2. A decrease in reserve requirements immediately increases the money supply. 3. The total check able deposits a bank may have can be determined by dividing its reserves by the reserve requirement. 4. The most liquid measure of the U.S. money supply is M1. 5. Federal Reserve banks stand ready to convert dollars into gold upon demand.
Which of the following would reflect the transactions demand for money?
A. Keeping funds in your savings account because the interest rate looks relatively attractive B. Selling common stocks you own and increasing the money in your savings account because you think stock prices will fall soon C. Keeping funds in your checking account to pay your rent D. Buying a U.S. Treasury security using funds from your checking account