16If a commercial bank has $160 million in deposits, $40 million in actual reserves, and a reserve requirement of 20 percent, that bank can make new loans of:

Select one:

a.$8 million.

b.$32 million.

c.$128 million.

d.$160 million.

17In the equation of exchange, MV and PQ can be interpreted as, respectively:

Select one:

a.current GDP and constant GDP.

b.constant GDP and current GDP.

c.total spending and the dollar value of output in the economy.

d.the dollar value of output in the economy and total spending.

18Monetary policy involves changing:

Select one:

a.banking laws to influence economic activity.

b.employment laws to influence economic activity.

c.the money supply to influence economic activity.

d.tax and expenditures laws to influence economic activity.

19Spending by households and businesses is influenced by:

Select one:

a.the availability of loans.

b.the size of the money supply.

c.the interest rates charged on loans.

d.all of these answers are correct.

20The effect on interest rates and the amount of loans made caused by a drop in a bank's required reserves is shown by the movement from:

Select one:

a.D1 to D2 in Figure A.

b.D1 to D2 in Figure B.

c.S1 to S2 in Figure C.

d.S1 to S2 in Figure D.