the economics of money, banking, and financial markets

490 $

© 2014 Pearson Canada Inc.$

11. 
    

    Assuming initially that r = 10 percent and c = 40 percent, an increase in r to 15 percent
    causes ____.
    A) the money multiplier to increase from 2.55 to 2.8
    B) the money multiplier to decrease from 2.8 to 2.55
    C) the money multiplier to increase from 1.82 to 2
    D) no change in the money multiplier
    Answer: B
    Diff: 3 Type: MC Page Ref: 393
    Skill: Applied
    Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
    central bank can control the level of deposits by setting the level of reserves

    
    


12. 
    

    Assuming initially that r = 10 percent and c = 40 percent, a decrease in r to 5 percent causes
    ____.
    A) the money multiplier to increase from 2.8 to 3.11
    B) the money multiplier to decrease from 3.11 to 2.8
    C) the money multiplier to increase from 2 to 2.22
    D) the money multiplier to decrease from 2.22 to 2
    Answer: A
    Diff: 3 Type: MC Page Ref: 393
    Skill: Applied
    Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
    central bank can control the level of deposits by setting the level of reserves

    
    


13. 
    

    If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable
    deposits are $800 billion, and excess reserves total $0.8 billion, then the money supply is
    ____.
    A) $8000 billion
    B) $1200 billion
    C) $120 billion
    D) $8400 billion
    Answer: B
    Diff: 2 Type: MC Page Ref: 393
    Skill: Applied
    Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
    central bank can control the level of deposits by setting the level of reserves