1) Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500. You take $500 out of your passbook savings account and put it in your checking account. What is the overall effect on M1 and M2? A) M1 rises by $500, M2 falls by $500. B) M1 is unchanged, M2 is unchanged. C) M1 rises by $500, M2 is unchanged. D) M1 is unchanged, M2 falls by $500. 2) You are putting together a portfolio of assets. The four most important characteristics of the assets you will choose are expected return, time to maturity, A) risk, and liquidity. B) risk, and collateral C) risk, and reward. D) liquidity, and standard issue size. 3) Compared with money, bonds have A) less risk and less liquidity. B) less risk and more liquidity. C) more risk and less liquidity. D) more risk and more liquidity. 4) An increase in the real interest rate would cause an increase in the real demand for money A) no matter what the change in expected inflation. B) if expected inflation fell by less than the rise in the real interest rate. C) if expected inflation fell by the same amount as the rise in the real interest rate. D) if expected inflation fell by more than the rise in the real interest rate. 5) Over time, the wealth of society increases and payments technologies get more efficient. What is the effect on money demand of these two changes? A) Money demand rises proportionately to the rise in wealth. B) Money demand rises, but less than proportionately to the rise in wealth. C) The overall effect is ambiguous. D) Money demand declines.
1) Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500. You take $500 out of your passbook savings account and put it in your checking account. What is the overall effect on M1 and M2? A) M1 rises by $500, M2 falls by $500. B) M1 is unchanged, M2 is unchanged. C) M1 rises by $500, M2 is unchanged. D) M1 is unchanged, M2 falls by $500. 2) You are putting together a portfolio of assets. The four most important characteristics of the assets you will choose are expected return, time to maturity, A) risk, and liquidity. B) risk, and collateral C) risk, and reward. D) liquidity, and standard issue size. 3) Compared with money, bonds have A) less risk and less liquidity. B) less risk and more liquidity. C) more risk and less liquidity. D) more risk and more liquidity. 4) An increase in the real interest rate would cause an increase in the real demand for money A) no matter what the change in expected inflation. B) if expected inflation fell by less than the rise in the real interest rate. C) if expected inflation fell by the same amount as the rise in the real interest rate. D) if expected inflation fell by more than the rise in the real interest rate. 5) Over time, the wealth of society increases and payments technologies get more efficient. What is the effect on money demand of these two changes? A) Money demand rises proportionately to the rise in wealth. B) Money demand rises, but less than proportionately to the rise in wealth. C) The overall effect is ambiguous. D) Money demand declines.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1) Suppose your bank raises its minimum-balance requirement for free checking on checking
accounts by $500. You take $500 out of your passbook savings account and put it in your
checking account. What is the overall effect on M1 and M2?
A) M1 rises by $500, M2 falls by $500.
B) M1 is unchanged, M2 is unchanged.
C) M1 rises by $500, M2 is unchanged.
D) M1 is unchanged, M2 falls by $500.
2) You are putting together a portfolio of assets. The four most important characteristics of the
assets you will choose are expected return, time to maturity,
A) risk, and liquidity.
B) risk, and collateral
C) risk, and reward.
D) liquidity, and standard issue size.
3) Compared with money, bonds have
A) less risk and less liquidity.
B) less risk and more liquidity.
C) more risk and less liquidity.
D) more risk and more liquidity.
4) An increase in the real interest rate would cause an increase in the real demand for money
A) no matter what the change in expected inflation.
B) if expected inflation fell by less than the rise in the real interest rate.
C) if expected inflation fell by the same amount as the rise in the real interest rate.
D) if expected inflation fell by more than the rise in the real interest rate.
5) Over time, the wealth of society increases and payments technologies get more efficient. What
is the effect on money demand of these two changes?
A) Money demand rises proportionately to the rise in wealth.
B) Money demand rises, but less than proportionately to the rise in wealth.
C) The overall effect is ambiguous.
D) Money demand declines.
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