Economics Micro & Macro (CliffsAP)

8. How can commercial banks increase the money
   supply?
   A. By transferring funds to the Federal Reserve
   B. By buying bonds from the Federal Reserve
   C. By transferring money to other banks
   D. By keeping all deposits in reserves
   E. By lending out excess reserves


9. If the reserve requirement is 20 percent, the
   existence of $100 in excess reserves can create
   how much money in the money supply?
   A. $20
   B. $100
   C. $300
   D. $500
   E. $750

10. If the Federal Reserve lowers the reserve

requirement for banks, which of the following

is true?

A. There will be an increase in the money

supply.

B. Interest rates will rise.

C. There will be a decrease in the money

supply.

D. Banks will be forced to keep more money in

their vaults.

E. Businesses will purchase less capital

equipment.

11. If the transaction demand for money increases,
    what is the impact on the banking system?
    A. The Fed can decrease unemployment.
    B. The Fed can decrease aggregate supply.
    C. The Fed can decrease taxes.
    D. Banks will have a difficult time loaning
    excess reserves.
    E. Banks will have an easy time loaning excess
    reserves.

Part IV: AP Macroeconomics & Microeconomics Tests

7. Question 7 refers to the following graph.

In the graph above, equilibrium A is indicated for an economy without government spending. With the addition of

government spending resulting at equilibrium B, which of the following must be true?

A. Government spending is $500 and the spending multiplier is 5.

B. Government spending is $100 and the multiplier is 5.

C. Government spending is $100 and consumption increases by $500.

D. Government spending has no effect on GDP.

E. Consumption increases government spending by $300.

A

B

1,000 1,500

45 °

200

300

Consumption, investment, and

government expenditures

Consumption and investment