econ QUIZ # 9

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Suppose you decide to withdraw​ $100 in currency from your checking account. What is the effect on M1? Ignore any actions the bank may take as a result of your having withdrawn the​ $100.

M1 remains unchanged

Suppose that velocity is 3 and the money supply is​ $600 million. According to the quantity theory of​ money, nominal output equals

$1.8 billion

The U.S. dollar can best be described as

fiat money

Which of the following would be the least desirable candidate to be a good medium of​ exchange?

milk

If the money supply is growing at a rate of 4 percent per​ year, real GDP​ (real output) is growing at a rate of 4 percent per​ year, and velocity is​ constant, what will the inflation rate​ be?

0%

Currency and coin held by the public $300 Checking account balances $900 ​Traveler's checks $10 Savings account balances $2,600 Small denomination time deposits $5,000 Money market deposit accounts in banks $1,000 Noninstitutional money market fund shares $2,000 The M1 money supply is equal​ to

1210

Currency and coin held by the public $400 Checking account balances $1,900 ​Traveler's checks $10 Savings account balances $1,800 Small denomination time deposits $5,000 Money market deposit accounts in banks $1,000 Noninstitutional money market fund shares $2,000 The M2 money supply is

12110

Money supply $900 Price level 1.47 Real GDP $10,000 The velocity of money is equal to

16.33

Suppose the required reserve ratio is 9​% and a bank has the following balance​ sheet: Assets Liabilities Reserves ​$4,000 Deposits $20,000 Loans $16,000 This bank keeps required reserves of ​____ and excess reserves of ​_____

1800..........2200

Suppose you deposit ​$500 cash into your checking account. By how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.2​0? The change in checking deposits is equal​ to

2500

If the money supply is growing at a rate of 4 percent per​ year, real GDP​ (real output) is growing at a rate of 4 percent per​ year, and velocity is growing at 3 percent per year instead of remaining​ constant, what will the inflation rate​ be?

3%

Suppose that Deja owns a​ McDonald's franchise. She decides to move her​ restaurant's checking account to Wells​ Fargo, which causes the changes shown on the following​ T-account. Assets Liabilities Reserves +$100,000 Deposits $100,000 If the required reserve ratio is 0.15​, or 15 ​percent, and Wells Fargo currently has no excess​ reserves, the maximum loan Wells Fargo can make as result of this transaction is

85000

The formula for the simple deposit multiplier is

Simple Deposit Multiplier = 1/RR

Suppose that the Federal Reserve engages in an open market sale of ​$46 million in U.S. Treasury bills to banks. In the​ T-accounts for the Fed and for the banking system shown​ here, fill in the missing information. Federal Reserve Assets Liabilities _______ -​$46 million Reserves -​$46 million Banking System Assets Liabilities Treasury bills $46 million _________ -​$46 million

Treasury Bills......Reserves

Velocity is defined as

V = (P × Y)/M

Excess reserves

are reserves banks keep above the legal requirement.

An asset would be usable as a medium of exchange for all of the following reasons ​except:

the asset should be a commodity that has intrinsic value.

If the required reserve ratio is 0.20​, the maximum increase in checking account deposits that will result from an increase in bank reserves of ​$10,000 is

​$50000


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