IMG_1717.jpg - 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

# IMG_1717.jpg - C but have no effect on real GDP or the...

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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? A) 6.00 B) 13.75 C) 5.56 D) 10.80 D = 100 000 R: 8000 C : 10 000 E) 6.11 13) Suppose that the currency drain ratio is 40% and the central bank increases the monetary base by aRTD \$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? A) \$336,000 B) \$520,000 C) \$224,000 (D) \$160,000 E) \$400,000 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? 4,000 B) \$10,000 C) \$4,348 D) \$3,906 E) \$3,125 D = 0125 = 0,15 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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