Assume that the required reserve ratio is 20 percent. What is the maximum increa

Question

Assume that the required reserve ratio is 20 percent. What is the maximum increase in money supply for the banking system as a whole following a $12,000 injection into the banking system by the Federal Reserve? 31. a) $24,000 b) $240,000 c) 60,000 d) $2,400 32. Liquidity is defined as a) the ease with which a given asset can be converted to a store of value. b) the ease with which a given asset can be converted to a standard of deferred payment c) the ease with which a given asset can be converted to a medium of exchange d) the ease with which a given asset can be converted to a unit of account. 33. Stagflation occurs when an economy experiences a) Both inflation and increased GDP b) Both inflation and deflation c) Both Inflation and cyclical unemployment d) Either inflation or unemployment 34. Which of the following is a primary function of a central bank? a) Support the U.S. president's economic policy b) Set and oversee bank regulations c Oversee federal tax policy d) All of these e) None of these 35 Open-market operations are such a powerful tool of monetary policy that they are reserved for emergencies only a) True b) False 36. To reduce the political influence on the Board of Governors, members are appointed by the President to serve 14 year staggered terms. a) True b) False

Explanation / Answer

32. c. Liquidity means how easily and quickly money can be converted into cash. It is inversely related to interest rate
33. c. During stagflation prices increase but output remains more or less constant. Constant output means there is no new employment.
34. d. All of the above are true in this case.
35. true. In open market operation, Fed buys and sells government securities.

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