Money Multiplier Practice (OLD)

The video tutorial explains the concept of the money multiplier in economics, using various scenarios to illustrate how changes in reserve requirements and Federal Reserve actions, such as buying or selling bonds, affect the money supply. The tutorial provides step-by-step calculations of the multiplier and the resulting changes in the money supply, emphasizing the impact of reserve requirements on the multiplier effect. It concludes with a practical example of a bank deposit to reinforce the concept.

What is the primary focus of the practice scenarios discussed in the introduction?

• Analyzing stock market trends

• Determining the money multiplier

• Understanding inflation rates

• Calculating interest rates

If the Fed buys $80 worth of bonds with a 10% reserve requirement, what is the resulting change in the money supply?

• $80 decrease

• $800 increase

• $80 increase

• $800 decrease

When the Fed sells $100 worth of bonds with a 20% reserve requirement, what happens to the money supply?

• $100 decrease

• $100 increase

• $500 decrease

• $500 increase

How does an increase in reserve requirements affect the money multiplier?

• It doubles the multiplier

• It decreases the multiplier

• It increases the multiplier

• It has no effect on the multiplier

If you deposit $50 in a bank with a 20% reserve requirement, what is the net change in the money supply?

• $250 increase

• $50 increase

• $0 change

• $200 increase