C) unit of account all of the above 42) With fractional reserve banking A) banks
ID: 1128006 • Letter: C
Question
C) unit of account all of the above 42) With fractional reserve banking A) banks can act as securities brokers. B) banks retain only a portion of their deposits in their vaults or at Federal Reserve banks. C) banks can not generate profits D) monetary policy will be ineffective. 43) Net public debt is 43)_ A) all public debt minus all money owed on the federal income tax. B) all federal public debt irrespective of who owns it. C) all public debt plus all government interagency borrowing. D) gross public debt minus all government interagency borrowing. 44) Contractionary fiscal policy will most likely 44)_ A) involve cutting taxes. C) reduce the price level B) raise real GDP D) involve increasing government spending 45) Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of 45) $100 can make additional loans of A) $20. s80. C) $400 D) so. 46) Which of the following fiscal policy actions would be appropriate if the economy is experiencing an 46) inflationary gap? A) an increase in government spending C) an increase in the money supply B) an increase in taxes D) a decrease in interest rates 47) 47) Other things being equal, what is the effect of deficit spending on interest rates? A) There is no impact unless the Federal Reserve decides to alter the money supply. B) Interest rates hold constant because the demand for credit decreases. C) Interest rates decline. D) Interest rates rise. 48) 48) Which of the following is a factor influencing the demand for money? A) asset demand C) precautionary demand B) transactions demand D) All of the above are correct B-6Explanation / Answer
42) Option B is correct (by definition)
43) Option D is correct (by definition)
44) Option C is correct (AD curve shifts to the left and price level decreases)
45) Option B is correct (= 100 - 20% x 100)
46) Option B is correct (Increase in taxes would mean a contractionary fiscal policy which is apt for closing an inflationary gap)
47) Option D is correct (interest rates rise as IS curve shifts to the right)
48) D - All of the above are correct (Demand for money consists of all of them)
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