Question Details

The money multiplier tells us the ultimate increase in 


1. The quantity of money demanded varies 
a) directly with both prices and output b) inversely with both prices and output 
c) directly with prices and inversely with output 
d) inversely with prices and directly with output 
2. If the central bank prints more $10 bills and spends them, then as a direct result of this action 48 
a) M1 and M2 both increase b) neither M1 nor M2 increase 
c) M1 increases but M2 does not d) M2 increases but M1 does not 
3. A sale of government bonds by the central bank should cause 
a) bond prices to rise b) an increase in the supply of money 
c) an increase in chartered banks loans 
d) a decrease in reserves of the banking system 
4. The money multiplier tells us the ultimate increase in 
a) the income level due to an increase in the money base 
b) the money supply due to an increase in the money base. 
c) the money supply due to an increase in the income level 
d) the income level due to an increase in the money supply 
5. "The earlier predictions underestimated currency in circulation and treasury balances at the Fed, both of which drained reserves from the banking system." Lower reserves means 
a) lower interest rates b) lower money supply 
c) lower unemployment d) higher inflation




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