Use the following to answer question 8: Figure: Change in the Demand for U.S. Do

Question

Use the following to answer question 8: Figure: Change in the Demand for U.S. Dollars Euros per U.S. dollar Supply of U.S. dollars Quantity of U.S. dollars 8. (Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars. The change from Di to Da will occur, all other things being equal, if the: A) supply of curos decreases B) demand for euros increases. C) demand for euros decreases. D) demand for dollars increases. Use the following to answer question 9 Scenario: Money Supply Changes II Charlotte withdraws $8,000 from her checkable bank deposit to pay tuition this semester. Assume that the reserve requirement is 20% and that banks do not hold excess reserves. 9. (Scenario: Money Supply Changes I) According to the scenario Money Supply Changes II, as a result of the withdrawal, required reserves: A) decrease by $1,600. B) decrease by $6,400. C) decrease by $8,000. D) don't change.

Explanation / Answer

8. The correct answer is: d)

Reason: Clearly the figures shows a rightward shift of the demand curve which can only occur if the demand for dollars increases due to certain reasons.

9. The correct answer is: a)

Reason: Reserve requirement = 20% of deposits.

Hence, decrease in reserve requirement = 20%*8000 = $1600.

Thanks!

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