money supply and money demand

Mr. Chan sells his NCDs issued by a restricted licence bank for HK$200 000. He then deposits HK$150 000 of the amount with a deposit - taking company as time deposits and holds the remaining HK$50 000 as cash. The immediate effects of the above actions on the money supply in Hong Kong dollar are:

• M1, M2 and M3 will increase.

• M1 and M3 will increase while M2 will remain unchanged.

• M1 and M2 will increase while M3 will decrease.

• M1 and M2 will increase while M3 will remain unchanged.

Suppose a banking system does not hold any excess reserves and the legal reserve ratio is 25%. Dicky deposits $200 cash with a bank, and the bank lends the excess reserves to Stella. Stella then deposits the amount with another bank, but the bank does not lend out the amount. The deposits of the banking system will increase by _.

• $200

• $350

• $400

• $800

Gold is no longer used as money in modern societies. One of the reasons is that it is not _____.

• Scarce

• Durable

• Divisible

• Portable

Octopus cards ___ be regarded as money because_____.

• can...they are portable

• can...they are accepted by many shops.

• cannot ... they are indivisible

• cannot ... their quantity is large

Mr. Wong withdraws HK$10 000 from a deposit - taking company. He then deposits 50% of the amount with a licensed bank as savings deposits and the remaining part a demand deposits. The immediate effects of the above actions on the money supply in Hong Kong dollar are that:

• Both M2 and M3 will decrease.

• Both M1 and M2 will remain unchanged.

• M1 will increase while M2 will remain unchanged.

• M1 will increase while M3 will remain unchanged.