Reference no: EM131388808
1) Demand for money holdings are
a) postively related to the interest rate.
b) inversely related to the interest rate.
c) inversely related to real disposable income.
2) One result of a successful contractionary monetary policy would be
a) an increase in the money supply.
b) a decline in the price level.
c) an increase in business investment.
3) Assume the reserve ratio is 20 percent and Federal Reserve’s buys $4 million of Treasury bills from the public. The public places these new deposits into checking accounts. As a result, the supply of money is: Hint: Calculate the Monetary Multiplier
a) directly reduced by $4 million, but the money-creating potential of the commercial banking system is increased by $20 million.
b) directly increased by $4 million and the money-creating potential of the commercial banking system is increased by $20 million.
c) directly increased by $4 million and the money-creating potential of the commercial banking system is increased by $16 million.
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