Solutions? A) decreases banks\' reserves and increases banks\' securities. B) in
ID: 1106513 • Letter: S
Question
Solutions? A) decreases banks' reserves and increases banks' securities. B) increases banks' reserves and decreases banks' securities. C) increases banks' total assets. D) involves a bank selling government securities to the Fed. 26) When a bank has excess reserves A) it can create money. B) it can make loans C) it has too many loans. D) Both answers A and B are correct. 27) The money multiplier is A) the amount by which a change in the quantity of money is multiplied to determine the change in the monetary base. B) the amount by which a change in the monetary base is multiplied to determine the change in the quantity of money C) equal to bank reserves divided by the change in the monetary base D) equal to bank reserves divided by the change the quantity of money 28) The demand for money is related to the nominal interest rate. A) positively B) negatively C) not D) None of the abov and the nominal interest rate changes with the inflation rate. e answers is correct because the relationship between the demand for money 29) The demand for money curve shifts rightward if A) the price level increases B) real GDP increases. C) the nominal interest rate increases. D) the real interest rate decreases.Explanation / Answer
The answer for question number 26 is option d. Excess reserves can be used by the banks not only in making loans but this process multiplies the value of money in the economy so that money is created eventually.
The answer to question number 27 is option B. Money multiplier and monetary base together determine the level of money in the economy. Therefore when change in the monetary base is multiplied witht the value of multiplier we find the change in the money supply.
The answer to question number 28 is option B. Money demand is negatively related to interest rate in the sense that higher the interest rate increases the opportunity cost of holding money so people demand less money.
The answer to question number 29 is option B. Demand for money is positively related to real GDP. Hence when real GDP increases demand for money curve shifts to the right
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.