Question 15

If a household consumer withdraws $5,000 from their savings account, initially, M1 will ________ and M2 will ________.

Adecrease; decrease

Bdecrease; increase

Cincrease; be constant

Dincrease; decrease

Eincrease; increase

Question 16

The supply of loanable funds is ________ because households save more at higher interest rates, while the demand for loanable funds is ________ because firms prefer to borrow at lower interest rates.

Aupward sloping; downward sloping

Bvertical line; upward sloping

Cdownward sloping; upward sloping

Ddownward sloping; horizontal line

Ehorizontal line; downward sloping

Question 17

Which of the following stands correct about the lags in fiscal and monetary policies?

AThe time required to identify a problem is greater in the case of monetary policy.

BMore time is required to implement a monetary policy decision.

CThe time required to identify a problem is greater in the case of fiscal policy.

DThere is no lag time in implementing a fiscal policy decision.

EThe lags in both fiscal and monetary policies are of the same magnitude.

Question 18

The equilibrium in the market of loanable funds determines the

Areal interest rate and quantity of loanable funds

Bnominal interest rate and quantity of money supply

Cnominal interest rate and quantity of loanable funds

Dreal interest rate and demand for money

Ereal interest rate and supply of goods and services

Question 19

Assume that a bank has a total deposit of $55,000 and the reserve ratio is 20%. What are the amounts of money that the bank will keep for itself and it will give out as loans?

AThe bank's fractional reserve is equal to $11,000, and the excess reserve is equal to $44,000.

BThe bank's fractional reserve is equal to $11,000, and the excess reserve is equal to $55,000.

CThe bank's fractional reserve is equal to $44,000, and the excess reserve is equal to $11,000.

DThe bank's fractional reserve is equal to $55,000, and the excess reserve is equal to $66,000.

EThe bank's fractional reserve is equal to $55,000, and the excess reserve is equal to $44,000.

Question 20

Use the data table to answer the question that follows.

GDP $10 billion Consumption $5 billion Government spending $2 billion