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QUESTION 45 Suppose you transfer $1,000 from your checking account into your savings account. What are the effects on M1 and M2 money supply? M1
QUESTION 45
- Suppose you transfer $1,000 from your checking account into your savings account. What are the effects on M1 and M2 money supply?
- M1 decreases; M2 remains the sameM1 increases; M2 remains the sameM1 increases; M2 decreasesM1 decreases; M2 decreases
2 points
QUESTION 46
- The ability of a commercial bank to increase the money supply is limited by the
- eligibility of the bank for currency drafts and its ratio of M2 to M1.
- availability of eligible borrowers and the bank's reserves in relation to legal reserve requirements.
- the public's demand for gold.
- number of competing banks in the market.
2 points
QUESTION 47
- Suppose Fairfax Bank has $1 million in total deposits, and the required reserve ratio is 10% and that it makes all the loans that it is legally allowed to make to eligible borrowers. What will be the full expansion of the money supply?
- $10 million$1 million$900,000$100,000
2 points
QUESTION 48
- If the Federal Reserve were to raise the required reserve ratio,
- excess reserves would remain the same
- excess reserves would increase
- excess reserves would decrease
- there would be no effect on the nation's money supply
2 points
QUESTION 49
- When the Federal Reserve engages in conducting open market operations, what is it doing?
- Changing the required reserve ratioChanging the discount rateBuying and selling government bonds and/or other securitiesAll of the above are considered to be open market operations
2 points
QUESTION 50
- The economic goal of a gold standard is to
- make recessions worse on purpose to help out Wall Street.shift wealth from the middle class to the rich.reduce uncertainty among market actors by limiting the power of government authorities to increase the amount of money in circulation.conserve on natural resources, such as pulpwood, used to make paper money.
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