It\'s extremely imperative I get the correct answer on these questions, which wi

Question

It's extremely imperative I get the correct answer on these questions, which will help me learn the material for an upcoming exam. Please try to answer these questions correctly.

1. Which of the following is NOT an example of a precautionary money balance?
a. Currency in a cash register at a department store
b. An extra $20 bill in the purse of a college student going on her first blind date
c. A $100 traveler's check, folded and placed behind your driver's license in your wallet
d. Two quarters carried to school by a fourth grader who has missed the school bus twice this year in case he needs to call home
e. An extra $100 bill placed in your wallet as you drive to visit a sick aunt, just in case you find a garage sale along the way

2. If real GDP has grown at a rate of 3%, but nominal money supply and the price level have both grown by 5%, then the income velocity of money must have
a. Stayed constant
b. Decreased by 2%
c. Decreased by 3%
d. Increased by 3%
e. Increased by 8%


3. The size of the money multiplier
a. Cannot be influenced by actions of the Fed
b. Declines with a decrease in high-powered money
c. Decreases as the currency-deposit ratio decreases
d. Increases as the reserve ratio decreases
e. Increases as the reserve requirement is increased

4. Banks have an incentive to minimize their excess reserves since
a. Reserves earn no interest
b. Larger reserves mean less liquidity
c. Deposits are bank assets while reserves are not
d. The higher the reserve ratio, the weaker the bank's financial position
e. It makes banks less vulnerable in case there is a run on banks

5. Banks tend to hold some excess reserves
a. For precautionary purposes to reduce the probability of illiquidity
b. To avoid the costs of borrowing from other banks at the federal funds rate
c. To avoid the costs of borrowing from the Fed at the discount rate
d. All of the above
e. None of the above

6. If the currency-deposit ratio is 23% and the reserve ratio is 7%, the size of the money multiplier is
a. 0.3
b. 2.0
c. 3.0
d. 3.3
e. 4.1

Explanation / Answer

1. Which of the following is NOT an example of a precautionary money balance? [ D ] a. Currency in a cash register at a department store b. An extra $20 bill in the purse of a college student going on her first blind date c. A $100 traveler's check, folded and placed behind your driver's license in your wallet d. Two quarters carried to school by a fourth grader who has missed the school bus twice this year in case he needs to call home e. An extra $100 bill placed in your wallet as you drive to visit a sick aunt, just in case you find a garage sale along the way 2. If real GDP has grown at a rate of 3%, but nominal money supply and the price level have both grown by 5%, then the income velocity of money must have [ D ] a. Stayed constant b. Decreased by 2% c. Decreased by 3% d. Increased by 3% e. Increased by 8% 3. The size of the money multiplier [ E ] a. Cannot be influenced by actions of the Fed b. Declines with a decrease in high-powered money c. Decreases as the currency-deposit ratio decreases d. Increases as the reserve ratio decreases e. Increases as the reserve requirement is increased 4. Banks have an incentive to minimize their excess reserves since[ A ] a. Reserves earn no interest b. Larger reserves mean less liquidity c. Deposits are bank assets while reserves are not d. The higher the reserve ratio, the weaker the bank's financial position e. It makes banks less vulnerable in case there is a run on banks 5. Banks tend to hold some excess reserves [ D ] a. For precautionary purposes to reduce the probability of illiquidity b. To avoid the costs of borrowing from other banks at the federal funds rate c. To avoid the costs of borrowing from the Fed at the discount rate d. All of the above e. None of the above 6. If the currency-deposit ratio is 23% and the reserve ratio is 7%, the size of the money multiplier is [ A ] a. 0.3 b. 2.0 c. 3.0 d. 3.3 e. 4.1

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.