Unformatted text preview: C) but have no effect on real GDP or the velocity of circulation.
D) and decrease real GDP and increase the velocity of circulation.
E) and decrease the velocity of circulation, but have no effect on real GDP.
12) Consider an economy in which total deposits equal $100,000. Banks choose reserves of $8,000,
and households hold $10,000 in currency. What is the money multiplier in this economy?
D = 100 000
C : 10 000
13) Suppose that the currency drain ratio is 40% and the central bank increases the monetary base by
$560,000. Of the initial amount of loans created, how much does not return to banks because it is
kept by households in the form of currency?
14) The island nation of Loania has a currency drain ratio of 25 percent and a desired reserve ratio of
15 percent. What increase in the monetary base would be required to increase the quantity of
money by $12,500?
D = 0125
15) In the foreign exchange market, a change in which of the following will result in a movement
along the demand curve for Canadian dollars?
A) an increase in imports to Canada
B) the Canadian interest rate
C) an increase in Canadian exports
D) the expected future exchange rate
the nominal exchange rate...
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- Fall '19