Suppose that the Federal Reserve Bank is buying bonds from the bank to encourage economic growth, but real

growth is very slow and prices are not rising, using the equation of exchange what must be happening inside the

banks and in the larger economy?

a. Both bank liquidity and velocity it money are increasing

b. Bank liquidity is falling, and the velocity of money is increasing

c. Bank liquidity is increasing, and the velocity of money is falling

d. Both bank liquidity and the velocity of money are falling

if interest rates in the US are raised because of a contractionary monetary policy from the Fed, which three of the

following changes to our Balance of Payment would happen over time?

a. demand for our financial securities would increase; Capital Account would increase

b. demand for our merchandise exports would increase; Current Account would increase

c. demand for our financial securities would decrease; Capital Account would decrease

d. dividend and interest would flow into US over time; future Current Account would increase

e. dividend and interest would flow out of US over time; future Current Account would decrease

f. demand for our merchandistexports would decrease; Current Account would decrease