Which of the following will cause an increase in the amount of money that an individual wishes to hold?
a sale of bonds by the Fed.
a reduction in income.
a reduction in the interest rate.
a reduction in the price level.
When income increases
the money demand curve is unchanged.
the money supply curve shifts out.
the money supply curve shifts in.
the money demand curve shifts out.
In the money demand - money supply model, a purchase of bonds by the Fed
lowers the interest rate.
increases the quantity of interest bearing financial assets held by the non-bank public.
lowers bond prices.
shifts the money supply curve inward.
A fall in the interest rate will
have an indeterminate effect on bond prices.
cause an increase in bond prices.
will leave bond prices unchanged.
cause a fall in bond prices.
In the money demand - money supply model, and increase in the price level
causes an increase in the interest rate.
shifts the money supply curve outward.
increases the price of bonds and lowers the interest rate.
shifts the money demand curve inward.
At the current interest rate, suppose the supply of money is less than the demand for money. Then
income will tend to increase.
the price of bonds will tend to fall.
the interest rate will tend to fall.
investment will increase.
High powered money (i.e. the monetary base) equals
C+DD (currency plus demand deposits).
R+DD (reserves plus demand deposits).
C+R (currency plus reserves).
C+R+DD (currency plus reserves plus demand deposits).
For this question, assume that individuals do not hold currency (i.e., c = 0). If the reserve ratio is .4, the simple money multiplier is
4.0
2.5
.6
always equal to 1.0
The money multiplier decreases when
banks hold more excess reserves.
the required reserve ratio decreases.
the Fed conducts open market operations to purchase bonds.
the public reduces its currency holding.
If the reserve ratio is .25, currency holdings are zero, and the Fed makes a $5,000 purchase of bonds, then the money supply will change by
$20,000.
$3,750.
$5,000.
$12,500.