Answered: 4. What components of money are counted…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. What components of money are counted as part of M1? A) currency, M2 and checking accounts. B) currency, travelers' checks, checking accounts and M2 O c. C) C) currency, travelers' checks and checking accounts. D) currency, travelers' checks and money market accounts 10. Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? A) An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier B) An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier C) Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. D) Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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