AP Macro - Money Market & Bank Balance Sheets

Which of the following is true?

• The quantity of money demanded will be greater at IR2 than IR1

• The graph depicts a decrease in the money supply

• The quantity of money demanded will be greater at IR1 than IR2

• The graph depicts a leftward shift in the demand for money

Which of the following could have caused the shift seen on the graph?

• An increase in interest rates

• An increase in real income levels

• A decrease in the price level

• An increase in unemployment

Show the impact that a decrease in the price level would have on the demand for money

(NEW CONTENT) Imagine that the supply of money decreased. What impact would this have on interest rates? How would this impact aggregate demand?

Which of the following does not count as M1 money?

• cash

• checking account deposits

• bonds

• coins

Assume a bank provides a one-year loan for $1,000 with a nominal interest rate of 7%. The inflation rate over the duration of the loan was 4%. What is the real interest rate?

If the inflation rate is 5% and a bank wants to earn a real interest rate of at least 3%, they must provide a loan with a nominal interest rate of at least ________.

Which of the following is NOT considered an asset for a bank?

• demand deposits

• loans given out by the bank

• reserves held at the central bank

• government securities (bonds) owned by the bank

Assume the required reserve ratio is 12%. The bank currently has no excess reserves, and they receive a deposit of $400. As a result of the deposit, the money supply can increase by a maximum of?

• $3,733

• $3,133

• $3,333

• $2,933