1) Both theory and experience suggest that (fill in the blank) leads to lower vo

Question

1) Both theory and experience suggest that (fill in the blank) leads to lower volatility in both money supply growth and inflation.

having no central bank

having a central bank with a low degree of independence

having a central bank with a high degree of independence

having a central bank whose governors are elected by popular vote

2) You purchase computer software from a company in Chicago, Illinois that banks with Wells Fargo. You write a check on your Bank of America account in Tallahassee, Florida for $175.00 to pay for the transaction. Which statement below is accurate with regard to the impact on both banks' balance sheets?

Wells Fargo gains $175 in deposits and cash; Bank of America loses $175 in deposits and cash.

Wells Fargo gains $175 in deposits and reserves; Bank of America loses $175 in deposits and reserves.

Wells Fargo loses $175 in deposits and reserves; Bank of America gains $175 in deposits and reserves.   

Wells Fargo gains $175 in deposits and loses $175 in reserves; Bank of America loses $175 in deposits and gains $175 in reserves.

Since the transaction is for $175 for each bank, there is no change in deposits or reserves.

having no central bank

having a central bank with a low degree of independence

having a central bank with a high degree of independence

having a central bank whose governors are elected by popular vote

Explanation / Answer

1.C
2.B

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