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Econ HW 7- CH 15
Terms in this set (11)
Economic fluctuations are a. regular and predictable.
b. irregular but predictable.
c. irregular and unpredictable.
d. a long-run phenomenon.
Changes in the money supply affect real variables
a. in the short run, but not in the long run.
b. in the long run, but not in the short run.
c. in both the short run and the long run.
d. neither in the short run, nor in the long run.
The aggregate demand curve shows the relationship between the price level and the quantity of goods and services demanded, all else equal.
All else equal, when the price level increases, the value of money held by consumers
a. increases, increasing the wealth of consumers and encouraging them to increase their demand for consumption.
b. increases, increasing the wealth of consumers and encouraging them to reduce their demand for consumption.
c. decreases, reducing the wealth of consumers and encouraging them to increase their demand for consumption.
d. decreases, reducing the wealth of consumers and encouraging them to reduce their demand for consumption.
All else equal, an increase in the price level causes savings to decrease. This causes the interest rate to
a. decrease, lowering the demand for investment.
b. decrease, increasing the demand for investment.
c. increase, lowering the demand for investment.
d. increase, increasing the demand for investment.
If the preferences of consumers suddenly change and they decide to start saving more, a. the aggregate demand curve will shift right.
b. the aggregate demand curve will shift left.
c. the aggregate supply curve will shift right.
b. the aggregate supply curve will shift left.
In a system of 100-percent-reserve banking,
a. banks do not accept deposits.
b. loans are the only asset item for banks.
c. banks do not influence the supply of money.
d. All of the above are correct.
Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the
a. money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds.
b. money supply to rise. To reduce the impact of this the Fed could buy Treasury bonds.
c. money supply to fall. To reduce the impact of this the Fed could sell Treasury bonds.
d. money supply to fall. To reduce the impact of this the Fed could buy Treasury bonds.
If banks are required to hold 4 percent of deposits as reserves, and banks choose not to hold excess reserves, then the money multiplier is
a. 2.5 b. 4 c. 25 d. 40
The banking system currently has $50 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?
a. It falls by $20 billion.
b. It falls by $180 billion.
c. It falls by $110 billion.
d. None of the above is correct.
Imagine the Fed buys $10 billion worth of bonds, but does not want the money supply to increase. To keep the money supply from increasing, the Fed could
a. decrease reserve requirements.
b. lower the discount rate.
c. increase the interest rate paid on reserves.
d. do nothing, since a bond purchase should decrease the money supply.
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