To calculate the monetary base, one must:
a. Add currency held both inside financial institutions and outside financial institutions to deposits at the central bank.
b. Subtract currency in circulation from financial institutions' reserves.
c. Sum all financial institutions' reserves, because financial institutions' reserves and the monetary base are two terms meaning the same thing.
d. Subtract from financial institutions' reserves all deposits held with the central bank.
e. None of the above.
Question 2 - Assume the central bank decides to pursue contractionary monetary policy. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real credit market with supply of real credit shifting to the right.
b. Start the analysis in the real credit market with aggregate demand for real credit shifting to the left.
c. Start the analysis in the real credit market with demand for real credit shifting to the left.
d. Start the analysis in the real credit market with demand for real credit shifting to the right.
e. Start the analysis in the real credit market with supply of real credit shifting to the left.
Question 3 - For all practical purposes, a nation's monetary base is controlled by:
a. The government, financial institutions, and the central bank.
b. The central bank.
c. The International Monetary Fund and World Bank.
d. Individuals and financial institutions, by means of their preferred asset ratios, and the central bank.
e. No one because the monetary base is a free market quantity that is determined, like many macroeconomics variables, by the forces of supply and demand.
Question 4 - Assume the central bank decides to pursue contractionary monetary policy. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the right.
b. Start the analysis in the real credit market with demand for real credit shifting to the left.
c. Start the analysis in the real credit market with demand for real credit shifting to the right.
d. Start the analysis in the real credit market with supply of real credit shifting to the left.
e. Start the analysis in the real credit market with supply of real credit shifting to the right.
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