Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 34, Problem 6RQ
To determine
The functions of FED.
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Figure 30-3
On the following graph, MS represents the money supply and MD represents money demand.
O 2.0.
O 14.3.
O 2.9.
VALUE OF MONEY
O 0.35.
0.35
MS,
8000
MS₂
Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS₂; also
suppose the economy's real GDP is 65,000 for the year. If the market for money is in equilibrium,
then the velocity of money is approximately
13000
QUANTITY OF MONEY
MD
1.
2.
3.
Which expression describes the flattest money demand schedule?
O a. 1=450-2(3)
O b. 1=450-9(3)
O c. L-5(200)-5(10)
O d. L=5(200)-8(10)
Which of the following will lead to an increase in the equilibrium interest rate in the money market?
O a. Increase in general price level
O b. An increase in income
O c. Decrease in general price level
d. The Central Bank increases money supply
Which of the following statements describes the LM curve?
O a. It has a negative slope.
O b. It describes the relationship between supply and demand of goods.
O c. It represents the combination of interest rate and income where the goods market is in equilibrium.
O d. None of the above
If the money supply is $60 billion, the velocity of money is 7, and real GDP is $240 billion, then the
price level equals:
1.75
O 0.57
1.50.
O 4
O 1.25
Chapter 34 Solutions
Economics (Irwin Economics)
Ch. 34 - Prob. 1DQCh. 34 - Prob. 2DQCh. 34 - Prob. 3DQCh. 34 - Prob. 4DQCh. 34 - Prob. 5DQCh. 34 - Prob. 6DQCh. 34 - Prob. 7DQCh. 34 - Prob. 8DQCh. 34 - Prob. 9DQCh. 34 - Prob. 10DQ
Ch. 34 - Prob. 11DQCh. 34 - Prob. 12DQCh. 34 - Prob. 13DQCh. 34 - Prob. 14DQCh. 34 - The three functions of money are: LO34.1 a....Ch. 34 - Prob. 2RQCh. 34 - Prob. 3RQCh. 34 - Prob. 4RQCh. 34 - Prob. 5RQCh. 34 - Prob. 6RQCh. 34 - Prob. 7RQCh. 34 - Prob. 8RQCh. 34 - Prob. 9RQCh. 34 - Prob. 1PCh. 34 - Prob. 2PCh. 34 - Prob. 3PCh. 34 - Prob. 4PCh. 34 - Prob. 5P
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- QUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.arrow_forwardMSo MS, 10 2 MD 3.0 3.1 3.2 3.3 3.4 3.5 Real money (trillions of 2000 dollars) The figure above illustrates the effect of 1) a decrease in the required reserve ratio. O 2) an increase in the required reserve ratio. O 3) a rise in the discount rate. O 4) a Fed open market sale of government securities. Interest rate (percent per year)arrow_forward4-2 Module Four Homework LO 5 166 PIE To use money growth as a short-term monetary policy instrument, a central bank must belleve that Multiple Choice Saved there is a stable link between the monetary base and the rate of inflation only money matters there is an unpredictable relationship between money aggregates and inflation the deposit expansion multiplier is volatile and unpredictablearrow_forward
- Suppose a customer makes a $2,280 cash withdrawal from Bank A. If the reserve requirement was total decrease in the money supply in the 6 percent, the deposit would ultimately lead to a economy, if all banks in the system lend out 100 percent of their excess reserves. O $2,143.20 O $2,280 O $28,500 O $35,720 $38,000arrow_forwardScenario: Assets and Liabilities of the Banking System Assets Loans Reserves Reference Ref 14-12 O $111.111 O $250,000 $900,000 100,000 O $666,667 O $1 million Liabilities Deposits (Scenario: Assets and Liabilities of the Banking System) Suppose that the reserve ratio is 10% when the Fed buys $100,000 worth of U.S. Treasury bills from the banking system. If the banking system does NOT want to hold any excess reserves. will be added to the money supply. $1,000,000arrow_forwardSuppose the Fed buys $400 worth of Treasury Securities from commercial banks. How would that transaction affect the balance sheet of the commercial banks? Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $400. Commercial banks' Treasury Securities would fall by $400 and their Reserves would rise by $200. O Commercial banks' Treasury Securities would fall by $200 and their Reserves would rise by $200.arrow_forward
- Which of the following statements is true about bonds? 1) A bond's dollar price is calculated as a growth rate. 2) The dollar price and interest rate of a bond have a positive relationship. 3) Bonds can never default. 4) The dollar price and interest rate of a bond have an inverse relationship. 5) Bonds are ownership shares in a firm.arrow_forwardA headline reads: "Fed Cuts the Federal Funds Rate by Half a Point." This suggests that: 1) The prime interest rate will rise 2) Monetary policy has eased 3) Tax rates have been reduced. O4) The discount rate will risearrow_forwardSuppose a banking system has a required reserve ratio of 10% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? $70,000; 700,000. O $100,000; $1,900,000. $90,000, $900,000. O $10,000; $100,000.arrow_forward
- Using the simply multiple deposit multiplier model, if the Federal Reserve Bank wants lending to increase by $4,500, and th required reserve ratio is 5%, how much do they need to increase reserves by? O 225 O 205 O 270 O 255arrow_forwardNow, suppose the reserve ratio in the banking system changes to 20% and a $100,000 is deposited into the first bank in the system. What will be the immediate excess reserves for that first bank in the system and by how much can the total money supply in the system expand? O $100,000; $1,900,000. O $80,000; $400,000 $90,000; $900,000. O $10,000; $100,000.arrow_forwardUsing the simply multiple deposit multiplier model, the Federal Reserve Bank desires to increase the size of checkable deposits by $50,500. If the required reserve ratio is 5%, then the Fed needs to purchase worth of securities in the open market. O $2,445 O $2,650 O $2,525 O $2,500arrow_forward
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