7. For each of the following statements, indicate whether it is correct by checking the appropriate box: a) A decrease in the legal cash flow coefficient (θ) allows commercial banks to grant more loans on the basis of the same amount of deposits, leading to an increase in the value of the money multiplier and therefore in the money supply in circulation in the economy; b) When the Central Bank conducts an open market operation, consisting of the purchase of Treasury bills, the money supply in circulation in the economy increases, all other things being equal; c) If the fraction of the money supply held in the form of fiat money is 25%, and if the legal tender coefficient (θ) is 20%, then the money multiplier is 2.5; (d) If the fraction of the money supply held in the form of currency is 20% and the legal cash flow coefficient is 25%, then the money multiplier is 2.5 ; e) None of the above statements is correct.
7. For each of the following statements, indicate whether it is correct by checking the appropriate box:
a) A decrease in the legal cash flow coefficient (θ) allows commercial banks to grant more loans on the basis of the same amount of deposits, leading to an increase in the value of the money multiplier and therefore in the money supply in circulation in the economy;
b) When the Central Bank conducts an open market operation, consisting of the purchase of Treasury bills, the money supply in circulation in the economy increases, all other things being equal;
c) If the fraction of the money supply held in the form of fiat money is 25%, and if the legal tender coefficient (θ) is 20%, then the money multiplier is 2.5;
(d) If the fraction of the money supply held in the form of currency is 20% and the legal cash flow coefficient is 25%, then the money multiplier is 2.5 ;
e) None of the above statements is correct.
Step by step
Solved in 2 steps
