The principal reason for requiring commercial banks to maintain reserves at the Fed is to

Fed more control over the money-creating ability of banks

The money-creating ability of banks will be less than the max indicated by multiplier when:

people hold a portion of their money as currency

If policymakers want to reduce unemployment by increasing investment, which is best option?

purchase of gov't securities by the Fed

Commercial banks can create money by

lending excess reserves to customers

The demand for money increases when national income increases because

spending on goods and services increases

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AP Macroeconomics Unit IV: Money, Banking & Monetary Policy

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Questions 11

Answers

1
Which of the following is the source of the supply of loanable funds?
stock market
savers
investors
banks & mutual funds
2
If checkable desposits increase by $1000 & excess reserves increase by $500, the rrr% must be
30%
50%
60%
40%
3
The principal reason for requiring commercial banks to maintain reserves at the Fed is to
Fed more control over the money-creating ability of banks
enable gov't to borrow cheaply from the Fed
insure that banks do not make excessive profits
provide the max amount of resources a bank would ever need
4
The money-creating ability of banks will be less than the max indicated by multiplier when:
interest rates are high
velocity of money is rising
people hold a portion of their money as currency
gov'ts budget is in deficit
5
If policymakers want to reduce unemployment by increasing investment, which is best option?
increase in gov't expenditures only
purchase of gov't securities by the Fed
increase in transfer payments
increase in the reserve requitement
6
Investment demand most likely increases when
the real rate of interest rates rises
the cost of capital rises
investor optimism improves
real GDP increases
7
Commercial banks can create money by
maintaining a 100% reserve requirement
sending vault cash to the Fed
lending excess reserves to customers
transferring depositors' accounts at the Fed
8
All of the following are components of the money supply in the US EXCEPT
gold buillion
paper money
checkable deposits
coins
9
The demand for money increases when national income increases because
interest rate increases
spending on goods and services increases
public becomes more optimistic about the future
budget deficit increases
10
How will lower interest rates in the US cause the value of the dollar & exports to change?
$ increase; exports increase
$ decrease; exports unchanged
$ increase; exports decrease
$ decrease; exports increase
11
If the money supply increase, what happens in the money market?
nominal interest rate rises
transaction demand for money falls
nominal interest rate does not change
nominal interest rate falls

AP Macroeconomics Unit IV: Money, Banking & Monetary Policy Flashcards | StudBud