The opposite direction of the state of the economy

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the opposite direction of the state of the economy. For instance, if the economy expands the number of people on the welfare rolls and collecting unemployment compensation will decline. Again, these expenditures will rise when the economy is in recession.
PRINCIPLES OF MACROECONOMICS QUIZ #4 – COVERING CHAPTERS 10&11 1. Explain the difference between commodity monies, fiat money, and legal tender.
2. Explain what will happen to the size of both M 1 and M 2 in each of the following situations: (a) Bill withdraws $500,000 from his money market account to buy a famous painting. (b) Paul transfers $10,000 from his NOW account to his savings account. (c) Sarah takes $5,000 out of her savings account and transfers it to her checking account. (a) M 1 stays the same and M 2 decreases. (b) M 1 decreases and M 2 stays the same. (c) Both M 1 increases and M 2 stays the same. 3. Assume there is an economy with a single bank, and the central bank sets the reserve requirement ratio at 10%. Assume also that the only bank had no transactions (i.e., no loans, reserves, or deposits) prior to an individual who deposits $1000 of currency with the bank. (a) As a result of this deposit, calculate the amount of required reserves, actual reserves, and excess reserves. (b) After the bank has issued the maximum amount of loans, what will be the total amount of loans, deposits, and money in the economy? (c) What is the size of the money multiplier for this economy?
4. Fill in the following table by indicating whether the proposed Federal Reserve action will increase or decrease the money supply. If the action is not a federal reserve power then write not applicable.
A sale of government debt
Buying government debt A decrease in taxes
A decrease in federal spending not applicable
A sale of government debt
A lowering of the discount rate
Buying government debt Increase

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