Question 15. 15. The money multiplier equals 1/ R , where R represents the quant

Question

Question 15. 15. The money multiplier equals        1/R, where R represents the quantity of reserves in the economy.
       1/R, where R represents the reserve ratio for all banks in the economy.
       1/(1+R), where R represents the quantity of reserves in the economy.
       1/(1+R), where R represents the reserve ratio for all banks in the economy.

       $64 of new reserves.
       $448 of new reserves.
       $700 of new reserves.
       $800 of new reserves.

Question 16. 16. If the money multiplier is 2 and the Fed buys $50,000 worth of bonds, what happens to the money supply?        it increases by $100,000
       it increases by $150,000
       it decreases by $100,000
       it decreases by $150,000

Explanation / Answer

1/R, where R represents the reserve ratio for all banks in the economy. it increases by $100,000 20 percent go vernment bonds with the quantity determined at the auction 50/300 $700 of new reserves (5600*0.125)

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