Ch4 MC Exercise (Answers will be provided later!)

Ch4 MC Exercise (Answers will be provided later!) - 64...

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Unformatted text preview: 64 Chapter 4 P @9575» DJ 999‘?” fie 9-957.” 9.097?” F" 5190‘!» >1 9.097?” a. the money supply b. c d $Wealth . investment . the monetary base An increase in nominal income ($Y) will cause: an increase in money demand an increase in central bank money an increase in the monetary base . an increase in the money supply MULTIPLE CHOICE QUESTIONS 1. Which of the following variables is NOT a stock variable? The US. government currently insures each bank account up to what level? $25,000 $50,000 $75,000 $100,000 An increase in the interest rate (i) will cause: a rightward shift in money demand a leftward shift in money demand an increase in the money supply a reduction in money demand Which of the following events will cause a reduction in the interest rate? a Fed sale of bonds a reduction in the money supply a reduction in $Y an increase in money demand Which of the following variables is an asset on a bank's balance sheet? I‘CSCX'VCS . checkable deposits the monetary base currency Which of the following variables is a liability on a bank's balance sheet? currency checkable deposits bonds I'CSEI‘VCS Financial Markets 65 8. Which of the following variables is a liability on the Fed's balance sheet? checkable deposits bonds currency loans 9-.“ FTP” to A central bank purchase of bonds will cause which of the following to occur? a. a reduction in the monetary base b. an increase in the monetary base c. a reduction in the price of bonds d. an increase in the price of bonds 10. An expansionary open market operation will tend to cause: a. an increase in bond prices ($PB) and an increase in the interest rate (i) b. an increase in $PB and a reduction in i c. a reduction in $PB and a reduction in i d. a reduction in $PB and an increase in i 1 l. A contractionary open market operation will cause: a. a reduction in the money supply b. an increase in the money supply 0. an increase in the monetary base (1. the interest rate to fall 12. Which of the following will occur when the interest rate increases? a. the price of bonds will fall b. the money demand curve shifts to the left c. the money demand curve shifts to the right d. the money supply curve shifts to the right 13. Suppose a bond pays $1000 in one year. If the price of the bond is $750, we know that the interest rate on this bond is: a. 7.5% b. 15% c. 25% d. 33% 14. Suppose money demand is greater than money supply at the current interest rate. Given this information, we know that: a. the interest rate (i) must fall to restore equilibrium b. i must increase to restore equilibrium c. the bond market is in equilibrium at the current interest rate (1. none of the above 66 Chapter 4 15. Suppose individuals do not hold currency and that the banks’ reserve ratio is 0.25. The money multiplier is: . 1/(1-25) = 1.33 .5 . _, _.— .-___...—_ _..._...._-...—.. x r . Suppose the ratio of currency to checkable deposits is 0.5 and the reserve ratio (9) is 0.25. I The money multiplier is: a. 1/.75=1.33 b. 1.6 c. 1/(1-.75)=4 d. 5 17. Which of the following events will cause an increase in the money multiplier? a. an increase in the reserve ratio b. an increase in the parameter c c. a reduction in the reserve ratio d. an increase in the monetary base 18. Which of the following events will cause an increase in the money supply? an increase in the interest rate an increase in the reserve ratio a Fed purchase of bonds an increase in the parameter c 9‘.“ 9‘?“ 19. The federal funds rate is determined in which of the following markets? a. the market for central bank money b. the market for reserves c. the money market d. the bond market 20. Suppose individuals hold both currency and checkable deposits. Given this information, which of the following expressions represents the money multiplier? a. l/[c+6(l—c)] b. 1/9 c. [c+9(l-c)] d. l/[l—c] e. l/[l-B] ...
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This note was uploaded on 02/19/2011 for the course ECON 1021 taught by Professor Kokwanwai during the Fall '08 term at CUHK.

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Ch4 MC Exercise (Answers will be provided later!) - 64...

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