Bank

Which of the following measures the opportunity cost of holding currency?

• the ability to access currency to meet unexpected expenses

• the foregone interest on alternative assets

• the nominal wage rate

• the increase in the demand for money

• the average income tax rates

Which of the following best describes the present value of one dollar received one year from today?

• It is worth less than a dollar received today

• It is not affected by changes in interest rates

• It decreases as interest rates decrease

• It is more than a dollar received today

• It has the same value as the dollar received today

Fred Jones withdraws $1,000 in cash from his savings account. What immediate effect does this transaction have on the monetary aggregate measures of M1 and M2?

• M1 decreases, M2 no change

• M1 no change, M2 no change

• M1 increases, M2 no change

• M1 increases, M2 decreases

• M1 no change, M2 decreases

Based on the balance sheets above for three different banks, which of the following is true, if the reserve requirement is 10 percent

• Bank B can increase its loans by $40

• Bank C has excess reserves

• Bank A has no excess reserves

• Bank B can increase its loans by $500

• Bank B has no excess reserves

Assume that the public holds part of its money in cash and the rest in checking accounts. If the central bank lowers the reserve requirement from 20 percent to 10 percent, the money supply will

• decrease by half

• increase by less than half

• decrease by more than half

• decrease by less than half

• exactly double

Assume that the reserve requirement is 10 percent. Marwa deposits $1 million in cash into her checking account at First Bank. This deposit will initially increase excess reserves at First Bank by

• $100,000

• $9 million

• $10 million

• $1 million

• $900,000

Banks expand the money supply when

• issuing credit cards

• printing money

• cashing checks

• accepting deposits

• making loans

A bank has $200 million in demand deposits and $150 million in reserves. The reserve ratio is 20 percent. What is the maximum amount of loans the bank can make from its reserves?

• $750 million

• $40 million

• $150 million

• $50 million

• $110 million

Which of the following is a monetary policy aimed at increasing the equilibrium interest rate in the money market?

• lowering the reserve ratio

• lowering the discount rate

• lowering the fed funds rate

• selling bonds on the open market

• raising taxes

Which of the following will occur in the money market when the aggregate price level increases?

• The opportunity cost of holding money will decrease

• The demand for money will increase and nominal interest rates will increase

• The money supply will increase and nominal interest rates will decrease

• The demand for money will decrease and nominal interest rates will decrease

• The demand for money will increase and nominal interest rates will decrease