Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.

Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the required reserve ratio is 10% and a bank receives a $10 million deposit into a checking account. By how much will deposits change in the banking system? (assume that the banking system currently has no excess reserves) Select one: $100 million. O $90 million. $10 million. O $110 million. Clear my choice
Question 2 In countries with very high rates of inflation (hyperinflation), it is usually the case that O the growth rate of the money supply is greater than the inflation rate. O the growth rate of the velocity of circulation is negative. O the growth rate of the money supply is less than the growth rate of the inflation rate. O the growth rate of the money supply is equal to the inflation rate.
Which of the following is NOT a function of money? O a. A unit of account O b. A store of value O c. An interest-earning asset O d. A medium of exchange
Banks create money by O a. buying U.S. government securities with cash. O b. printing money up to their required reserve limit. O c. creating deposits without limit. O d. making loans and creating deposits, a process that is limited by the size of banks' excess reserves. O e. printing dollar bills without limit.
If banks increase their holdings of excess reserves O a. the money multiplier increases and the money supply decreases. O b. the money multiplier decreases and the money supply increases. c. the money multiplier and the money supply decrease. O d. the money multiplier and the money supply increase.
Assume that a bank receives a deposit of $1,000 in cash, puts aside $200 as required reserves, and makes a loan of $800, these transactions imply that: O the money supply by the whole banking system can increase by $1,000. O the money supply by the whole banking system can increase by $4,000. the money supply by the whole banking system can increase by $8,000. O the money supply by the whole banking system can increase by $5,000.
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Suppose the required reserve ratio increased from 5 percent to 10 percent, and suppose banks kept no excess reserves. Ceteris paribus, it follows that the "money" (or "deposit") multiplier would: Select one: O a. decrease from 20 to 10. O b. increase from 5 to 10. O c. decrease from 10 to 20. O d. decrease from 1/5 to1/10.
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The graph shows an equilibrium in the market for reserves. An open market purchase would shift the supply curve to the rate to and cause the federal funds O A. right, fall O B. right, rise O C. left, rise O D. left fall Hint: Click on the graph to utilize the graph interactions feature. Select a curve to shift and move the slider in the direction of the shift to draw in the new curve. Quantity of Reserves, R Federal Funds Rate
2. When you discover a $20 bill in your coat pocket that you placed there last winter, you find you were unexpectedly using money as a O medium of exchange. store of value. unit of account. factor of production.