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DEPARTMENT OF ECONOMICS
Econ 500 – Money and Banking
Fall 2011
Assignment 4 – Answer Key
There are 12 multiple choice questions on this assignment, many of which require calculations.
Take your
time answering these questions.
I will grade all questions.
For each incorrect multiple choice question, I
will take of 2.5 points.
If you do not provide work for the questions that need to show work (see below), I
will take off additional 2.5 points per question (or just 2.5 points if the answer is correct).
Circle the best answer.
When uncertain, choose the best answer possible.
Multiple Choice
CHAPTER 17
There are 4 questions that require that you show work. In other words, you need to provide complete
calculations that show how you arrived at the answer.
1.
The deposit multiplier in the simple model is equal to 4 when the required reserve ratio is equal to
a.
0.25
b.
0.40
SHOW WORK!
c.
0.05
d.
0.15
The deposit multiplier is equal to 1/r in the simple model.
Since 1/r=4, it means r=0.25.
2.
The monetary base is comprised of
3.
A sale of government bonds by the FED (choose the best answer!)
4.
If the FED lends out $50 to banks (i.e. discount loans increase by $50) then
Econ 500
Fall 2011
Z. Janko

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