Question

QUESTION 145

1. If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.

   True

   False

1 points   

QUESTION 146

1. A central bank can help stop a bank panic by

   		calling in consumer loans.
   		raising the required reserve ratio.
   		acting as a lender of last resort.
   		decreasing income taxes.

1 points   

QUESTION 147

1. If gold is used as money in an economy, the money supply is easy to control.

   True

   False

1 points   

QUESTION 148

1. During the German hyperinflation of the 1920s, the large increases in the money supply were generated by the German government

   		selling large quantities of government bonds to the central bank, the Reichsbank.
   		printing large quantities of German marks.
   		significantly lowering the required reserve ratio to enable German businesses to obtain loans.
   		significantly raising the required reserve ratio to reduce business loans.

1 points   

QUESTION 149

1. A decrease in the reserve requirement ________ bank reserves and ________ the money supply.

   		decreases; increases
   		increases; decreases
   		decreases; decreases
   		increases; increases

1 points   

QUESTION 150

1. Expansionary monetary policy refers to the Fed's increasing the money supply and increasing interest rates to increase real GDP.

   True

   False

1 points   

QUESTION 151

1. If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a

   		institutional death spiral.
   		bank panic.
   		commodity crisis.
   		securitization meltdown.

1 points   

QUESTION 152

1. Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

   		higher; higher
   		lower; lower
   		lower; higher
   		higher; lower

1 points   

QUESTION 153

1. A decrease in interest rates can ________ the demand for stocks as stocks become relatively ________ attractive investments as compared to bonds.

   		increase; more
   		increase; similar
   		decrease; less
   		decrease; more
   		increase; less

Answer 1

145. False, when banks choose to hold more excess reserves against deposits, the money supply decreases because now less amount is loaned out and increase or decrease in choice to hold excess reserves does not affect money multiplier but it affects money supply.

146. acting as a lender of last resort. Central banks typically act as a last resort for lending to individual banks during crises like a bank run.

147. False, Gold doesn’t meet the economic definition of “currency” Gold money lacks most of the characteristics of money: It’s not very durable, is hard to transport, is easy to counterfeit and is a variable store of value.

148. printing large quantities of German marks. Money becomes worthless if too much is printed. If the money supply  increases faster than real output then, ceteris paribus, inflation will occur. This is what happened in Germany in 1920.

149. decreases; increases, When the Federal Reserve decreases the reserve ratio, it lowers the amount of cash that banks are required to hold in reserves, allowing them to make more loans to consumers and businesses. This increases the nation's money supply and expands the economy.

150. False, because expansionary monetary policy is when a central bank uses its tools to stimulate the economy. That increases the money supply, lowers interest rates, and increases aggregate demand.

151. bank panic

152. lower; lower, Contractionary monetary policy is a form of economic policy used to fight inflation which involves decreasing the money supply in order to increase the cost of borrowing which in turn decreases GDP and dampens inflation.

153. increses; more, A decrease in interest rates by the Fed, consumers will spend more with the lower interest rates making them feel they can finally afford to buy that new house or send their kids to a private school. Businesses will enjoy the ability to finance operations, acquisitions, and expansions at a cheaper rate, thereby increasing their future earnings potential, which, in turn, leads to higher stock prices.