FREE Master of Economics: Money, Banks, and Interest Rates Questions and Answers
Which of the following claims regarding bank money generation is untrue?
Banks do not want this ratio to drop below a level they deem prudent since the more money they produce, the lower the ratio of their reserves to deposits gets.
Suppose the multiplier is four and the first increase in projected investment is £100 billion annually. Which of the subsequent claims is untrue?
By £400 billion annually, the IS curve will veer to the right.
Which of the LM curve's following claims is untrue?
A leftward shift in LM is the outcome of increased interest rates at each level of output due to an increase in the demand for money.
Assume banks want a 4% ratio of reserves to deposits. And let's assume that the general public wants a 2% cash-to-deposit ratio. Which of the following statements is true?
1. The bank deposit multiplier is 25.
2. The money multiplier is 17.
In comparison to d, which is 2 or 2/100, or 0.02, r is 4%, or 4/100. The multiplier for bank deposits is 1/r, or 25 or 1/0.04. The multiplier for money is (1+d)/(r+d), or 1.02/0.06 or 17.
Which of the subsequent would result in a bank losing reserves?
In this scenario, the bank is required to transfer reserves to the bank of the recipient of the check.
Which of the following would not cause a rightward change in the money demand curve?
A motion along the money demand curve, not a shift of the curve, illustrates the impact of a change in interest rates on the amount of money demanded.
Which of the aforementioned claims regarding the IS curve is untrue?
The economy is moved to a lower point on the IS curve but not moved by a decline in interest rates.