What will be the immediate effect of an increase in the money supply, and what will be the long-term effect of this increase?

a.the increase in the money supply creates an excess supply of money which is eliminated by rising prices

b.the increase in the money supply creates an excess demand for money which is eliminated by falling prices

c.the increase in the money supply creates an excess supply of money which is eliminated by falling prices

d.the increase in the money supply creates an excess demand for money which is eliminated by rising prices

Suppose that the Bank of Springfield has $200,000 in deposits and $160,000 in loans. What is its reserve ratio?

a.16 percent

b.25 percent

c.80 percent

d.20 percent

Suppose that the Bank of Canada increases the bank rate, causing banks to borrow less from the Bank of Canada. What will happen?

a.banks will lend less to the public and the money supply will decrease

b.banks will lend more to the public and the money supply will increase

c.banks will lend less to the public and the money supply will increase

d.banks will lend more to the public and the money supply will decrease

Bob has won $10,000 on the lottery. He is deciding how much to save and how much to spend. Which interest rate should he care about most?

a.the before-tax real interest rate

b.the before-tax nominal interest rate

c.the after-tax nominal interest rate

d.the after-tax real interest rate