A critical assumption for the simple money multiplier (1/ rrd) to hold is that
a. banks do not hold excess reserves.
b. the public does not increase their level of currency holdings.
c. the required reserve ratio has to be greater than one.
d. both a and b.
e. all of the above.
B
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Other things being equal, an increase in the supply of money
A) reduces the amount of money balances. B) reduces aggregate demand. C) generates significant changes in relative prices. D) increases the price level.
Suppose that U.S. inflation is 3 percent and Turkish inflation is 70 percent. The effect of this discrepancy on the foreign exchange market is that
A) the Turkish currency will depreciate. B) the dollar will depreciate. C) it is impossible for interest rate parity to hold. D) the Turkish currency will appreciate.
Bank reserves will increase if which of the following changes occurs, assuming that there are no offsetting changes elsewhere on the Fed's balance sheet?
A) Fed loans decrease B) Currency held by the public increases C) Treasury deposits increase D) The float decreases
All of the following are true for first-degree price discrimination except which one?
A) Consumers pay less for the first units that they purchase. B) In reality, it is impossible to practice. C) Each consumer pays the maximum price they are willing to pay for every unit purchased. D) Consumers receive no consumer surplus.