AP Econ 4.4-4.7

The table gives the value of selected assets and liabilities of a commercial bank's T-account. What is the maximum amount of new loans the bank could lend with the given amounts of reserves?

$10,000

The table gives the value of selected assets and liabilities of a commercial bank's T-account. What is the money multiplier?

5

ABC Bank is a commercial bank in Country X. Assume the required reserve ratio is 25% and banks in Country X keep no excess reserves. If Maria deposits $1,000 in cash at ABC Bank, what will happen to the money supply after all adjustments are made in the banking system?

The money supply will increase by a maximum of $3,000

An increase in the equilibrium nominal interest rate could be caused by which of the following changes?

An increase in real income

Assuming a banking system with limited reserves, which of the following is a monetary policy action a central bank would implement to control inflation?

Sell government bonds to the public

Which of the following accurately describes the difference between how open market operations are used in a banking system with limited reserves compared to a banking system with ample reserves?

In a banking system with limited reserves, open market operations are used to indirectly influence the nominal interest rate by changing the money supply, whereas in a banking system with ample reserves, open market operations are used to maintain sufficient reserves.

The amount of money that the public wants to hold is $10 billion. With a monetary base of $2 billion and a money multiplier of 4, which of the following will most likely occur?

The nominal interest rate will increase.

Which of the following will most likely result in a lower real interest rate in a nation?

The citizens of the nation increase their savings for retirement.

Which of the following will shift the aggregate demand curve in the direction shown in the diagram above

A decrease in the policy rate

Which of the following changes in the loanable funds market will decrease the equilibrium real interest rate?

An increase in foreign financial capital inflows

Which of the following changes will necessarily occur as a result of an increase in the nominal interest rate?

The quantity of money demanded will decrease.

If the loanable funds market is in equilibrium, then which of the following must be true?

Borrowing equals lending.