8. CTable: Balance of Payment) Refer to the table Balance of Payments. The count
ID: 1128102 • Letter: 8
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8. CTable: Balance of Payment) Refer to the table Balance of Payments. The country's balance of payments on current account is: A) $355 billion. B)-$395 billion. C) $375 billion. D)-$355 billion. 9. I f the Fed decreases the reserve requirement from 10% to 5%, the money multiplier will and the money supply will most likely A) deereases derease B) decrease; increase C) increase; decrease D) increase; increase 10. Ifthe value of a US. dollar changes from ¥120 to ¥110, it follows that: A) the Japanese yen is depreciating and the U.S. dollar is appreciating. B) U.S. goods become cheaper for Japanese consumers to purchase. C) Japanese goods become cheaper for U.S. consumers to purchase. D) U.S. services become more expensive for Japanese firms to purchase. 11. A major problem with bank runs is that they: A) spread to other banks. B) cause inflation, because the money moves so fast in the economy C) cause interest rates to fall. D) cause both inflation and interest rates to fall. 12. Suppose U.S. consumers start buying more English shoes and fewer U.S. shoes. What impact will this trend have on the foreign exchange market? A) The supply of dollars will increase and the dollar will depreciate. B) The supply of dollars will decrease and the dollar will appreciate. C) U.S. demand for British pounds will increase and the dollar will appreciate. D) U.S. demand for British pounds will increase and the pound will depreciate. 13. If you transfer $1,000 from your savings account to your checking account: A) B) C) D) M1 decreases by $1,000, and M2 increases by $1,000. Ml increases by $1,000, and M2 decreases by $1,000. MI and M2 don't change. M1 increases by $1,000, but M2 doesn't change.Explanation / Answer
9. When reserve requirement was 10, multiplier = 1/0.1 = 10.
Now reserve requirement decreases to 5. Now multiplier= 1/0.05 = 20
So, it can be seen that money Multiplier has increased.
With decrease in reserve requirement, commercial banks are required to hold less cash on hand and they are able to increase their loans amount that they can provide to household or businesses. So, money supply will increase.
Answer- option D
10. The exchange rate of a dollar for Japanese Yen has decreased, which means yen has appreciated in value. Japanese people now will have to pay less to get one unit of u.s. good ,as value of US dollars has decreased in terms of Japanese yen.
Answer- option B
11. A major problem with bank runs is that they spread to other banks. The loss of confidence of one bank quickly extends to the other banks.
Answer-option A
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