1)If you transfer $100 from your piggy bank to your savings account

• M1 decreases by $100.
• M2 increases by $100.
• M1 decreases by $100 and M2 increases by $100.
• M2 decreases by $100 and M1 increases by $100.
• there is no immediate change in the money supply.

2) If you were a classical economist, which of the following is more consistent with your beliefs concerning an increase in the money supply?

• An increase in the money supply will cause a decrease in price level and an increase in nominal wages.
• An increase in the money supply will cause a decrease in price level and nominal wages.
• An increase in the money supply will cause an increase in price level and nominal wages.
• An increase in the money supply will cause an increase in price level and a decrease in nominal wages.
• An increase in the money supply will not impact the economy.

3) Which of the following would prohibit a bank from creating the maximum amount of money when money is deposited in the bank?

I. A decrease in the reserve requirement.

II. An increase in the federal funds rate.

III. The bank holds excess reserves.

• I only.
• II only.
• III only.
• I and III only.
• II and III only.

4) When making a decision, the next best alternative is called

• the comparative advantage.
• the absolute advantage.
• the opportunity cost.
• the production possibilities.
• a trade-off.

5) Leeville: 5 water bottles, 2 coffee mugs

Longland: 6 water bottles, 3 coffee mugs

The table above shows theresourcesrequired to produce one case of each good. Based on this data, the opportunity cost of producing one water bottle is

• 2/5 of a coffee mug for Leeville and 2.5 coffee mugs for Longland.
• 2/5 of a coffee mug for Leeville and 1/2 of a coffee mug for Longland.
• 2.5 coffee mugs for Leeville and 2/5 of a coffee mug for Longland.
• 2.5 coffee mugs for Leeville and 2 coffee mugs for Longland.
• 2 coffee mugs for Leeville and 1/2 of a coffee mug for Longland.