Payments. The s. Table: Balance of Payment) Refer to the balance of payments on
ID: 1128090 • Letter: P
Question
Payments. The s. Table: Balance of Payment) Refer to the balance of payments on current account is Puyment) Refer to the table Balance of A) $355 billion. B) $395s billion. C) $375 billion. D) $355 billion. Ifthe Fed decreases the reserve requirement from 10% to 5% the money multiplier win 9 , and the money supply will most likely A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase 10. Ifthe value ofa US dollar changes from ¥120to dollar changes from ¥120 to ¥110, it follows that isappreciating A) the Japanese yen is depreciating and the U.S. dollar is appreciating. U.S. goods become cheaper for Japanese consumers to D) U.S. services become more expensive for Japanese firms to purchase. Q Japanese goods become cheaper for U.s. consumers to purchase. 11. A major problem with bank runs is that they: A) spread to other banks. B) cause inflation, because the money moves so fast in the economy. cause interest rates to fall. C) D) cause both inflation and interest rates to fall. 12. Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market? A) The supply of dollars will increase and the dollar will depreciate. B) The supply of dollars will decrease and the dollar will appreciate C) U.S. demand for British pounds will increase and the dollar will appreciate D) U.S. demand for British pounds will increase and the pound will depreciate. 13. If you transfer $1,000 from your savings account to your checking account: A) MI decreases by $1,000, and M2 increases by $1,000 B) Ml increases by $1,000, and M2 decreases by $1,000. C) MI and M2 don't change. D) M1 increases by $1,000, but M2 doesn't change.Explanation / Answer
9. Multiplier = 1/Reserve requirement ratio
When RRR = 10% then Multiplier = 1/0.1 = 10
When RRR = 5% then Multiplier = 1/0.05 = 20
So, multiplier increases.
Decrease in reserve requirement means banks have to keep less reserves so now, they can lend more money. Money supply increases.
D) increase; increase
10. B) US goods becomes cheaper for Japanese consumers to purchase.
This is because intially Japanese consumers have to pay 120 Yen to buy 1 dollar good but now they have to pay 110 Yen to purchase the same item.
11. A) spread to other banks
Bank runs occur when banks are not able to honor their depositors. Bank run spreads to other banks this is because when one bank does not able to honor its depositors then confidence of people on banks removes, this induces general public to demand their deposits from their banks. As banks keep some reserves in liquid form so they are not able to pay money of all the depositors. This causes bank run.
12. A) The supply of dollars will increase and the dollar will depreciate.
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