1. The demand curve for money will shift to the right because of a: A) fall in the interest rate. B) rise in real GDP. C) rise in the interest rate D) fall in real GDP. 2. The money demand curve is _________ because a lower interest rate ___________. A) upward-sloping; increases the opportunity cost of holding money B) downward-sloping; increases the opportunity cost of holding money C) upward-sloping; decreases the opportunity cost of holding money D) downward-sloping; decreases the opportunity cost of holding money 3. Suppose a bank has excess reserves of P800 and the reserve ratio is 10%. If Diana deposits P1,500 of cash into her checking account and the bank lends P600 to Russell, that bank can lend an additional: A) P1,550 B) P1,300 C) P2,000 D) P1,350
1. The
A) fall in the interest rate.
B) rise in real
C) rise in the interest rate
D) fall in real GDP.
2. The money demand curve is _________ because a lower interest rate ___________.
A) upward-sloping; increases the
B) downward-sloping; increases the opportunity cost of holding money
C) upward-sloping; decreases the opportunity cost of holding money
D) downward-sloping; decreases the opportunity cost of holding money
3. Suppose a bank has
A) P1,550 B) P1,300 C) P2,000 D) P1,350
4. To increase the money supply, the central bank could:
A) lower the discount rate.
B) make open-market purchases.
C) lower reserve requirements.
D) lower the discount rate, make open-market purchases, or lower reserve requirements.
5. A decrease in the supply of money, with no change in demand for money, will lead to_______ in the equilibrium quantity of money and ______ in the equilibrium interest rate.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
6. Holding everything else constant, if the
A) a P1 loan can lead to a smaller change in the money supply than before the change in the required reserve ratio.
B) the money multiplier increases.
C) the amount of excess reserves falls also.
D) the money multiplier decreases.
7. When the BSP decreases bank's reserves through an open-market operation: A) deposits increase, currency in circulation increases, and the monetary base remains the same.
B) the monetary base decreases, the money multiplier decreases, and the money supply
increases.
C) loans increase, the federal funds rate rises, and the discount rate rises.
D) the monetary base decreases, loans decrease, and the money supply decreases.
8. All of the following are functions of money, EXCEPT:
A) a measure of wealth.
B) a medium of exchange.
C) a unit of account.
D) a store of value.
9. When an individual decides to hold money instead of other assets:
A) that individual is giving up the interest that could have been earned by holding other types of assets.
B) that individual becomes more likely to suffer from money illusion.
C) that individual is not affected by unanticipated inflation.
D) that individual is able to maintain a higher standard of living.
10. Which type of demand for money will tend to fall as the returns on the other financial assets rises?
A. transactions-related B. precautionary C. speculative
D. All of the above
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