Econ Test 2 Clicker Questions

Which of the following is not money? A. A Federal Reserve note. B. A quarter. C. A check. D. A bank deposit.

C. A check

While cleaning your apartment, you look under the sofa cushion and find a $50 bill. You deposit the bill into your checking account. The Fed's reserve requirement is 20% of deposits. A. What is the minimum amount that the money supply could increase?

Answer: $0 No loans, no money created >>>Currency falls by $50, deposit increases by $50 = no change

M1 is A. smaller than M2 and less liquid than M2. B. smaller than M2 but more liquid than M2. C. larger than M2 and less liquid than M2. D. larger than M2 but more liquid than M2.

B. Smaller than M2 but more liquid than M2

While cleaning your apartment, you look under the sofa cushion and find a $50 bill. You deposit the bill into your checking account. The Fed's reserve requirement is 20% of deposits. A. What is the money multiplier? B. What is the maximum money supply? C. What is the maximum amount that the money supply could increase?

Money Multiplier: 5 = (1/.02) <<<(1/R) Maximum amount of money supply: 5 x $50 = $250 >>>>The amount that one deposit multiplies by to get the total money supply in the end Maximum amount that the money supply could increase? $250 - $50 = $200

True or False? As money flows from person to person in the economy, it facilitates production and trade, thereby allowing each person to specialize in what he or she does best and so raising everyone's standard of living.

True