The higher the required reserve ratio, _____.
a. the larger the money multiplier
b. the smaller the money multiplier
c. the more the excess reserves after each round of the money-creation process
d. the more the money that can be lent in each round of the money-creation process
e. the lower the demand for cash by the non-banking public
QUESTION 2In the income-expenditure model, if autonomous investment decreases by 10 billion, _____.
a. the aggregate expenditure line shifts upward by 10 billion
b. planned saving increases by 10 billion
c. the aggregate expenditure line shifts downward by 10 billion
d. planned saving decreases by 10 billion
e. the equilibrium level of real GDP demanded increases by 10 billion
QUESTION 3Reducing pollution to zero emissions would be socially efficient.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Suppose the required reserve ratio is 0.2 and the Fed buys 100,000 in government securities from Big Bank. The commercial banking system creates _____ as a result of this initial injection by the Fed.
a. 1,000,000
b. 500,000
c. 100,000
d. 80,000
e. 200,000
QUESTION 5An increase in autonomous investment in an economy will _____.
a. shift the aggregate expenditure line upward
b. shift the aggregate expenditure line downward
c. result in an upward movement along the aggregate expenditure line
d. result in a downward movement along the aggregate expenditure line
e. increase aggregate expenditures only at high levels of income
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