20 If the reserve requirement is 20 percent, and banks keep no excess reserves,
ID: 1193223 • Letter: 2
Question
20
If the reserve requirement is 20 percent, and banks keep no excess reserves, an increase in an initial inflow of $100 into the banking system will cause an increase in the money supply of:
$50
$20
$100
$500
21
Suppose that consumer spending is expected to decrease in the near future. If output is at potential output, which of the following policies is most appropriate according to the AS/AD model?
No change in taxes or government spending
An increase in taxes
A reduction in government spending
An increase in government spending
Explanation / Answer
20 . $500
21. An increase in taxes
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