multiple choice please answer all question b. only Diane c. both Edgar and Diane
ID: 1131500 • Letter: M
Question
multiple choice please answer all question
b. only Diane c. both Edgar and Diane d. neither Edgar nor Diane 8. Which list ranks assets from most to least liquid? a. currency, demand deposits, money market mutual funds b. currency, money market mutual funds, demand deposits nutual funds, demand deposits , currency d. demand deposits, money market mutual funds, currency e interest rate that the Central bank charges banks that borrow reserves from it is the 9. Th a. federal funds rate. b. discount rate c. reserve requirement. d. prime rate 10. Open-market purchases by the Central Bank make the money supply increase, which makes the value of money increase. b. a. increase, which makes the value of money decrease. c. decrease, which makes the value of money decrease d. decrease, which makes the value of money increase. 11. If a country has positive net capital outflows, then its net exports are a. positive, and its saving is larger than its domestic investment. b. positive, and its saving is smaller than its domestic investment. c. negative, and its saving is larger than its domestic investment. d. negative, and its saving is smaller than its domestic investment. 12. If foreigners want to buy more Chinese bonds, then in the market for foreign-currency exchange the exchange rate a. and the quantity of dollars traded rises. b. rises and the quantity of Chinese Yuan traded falls. c. falls and the quantity of dollars traded rises. d. and the quantity of dollars traded falls. 13. Other things the same, as the price level rises, the real value of a Chinese Yuan a. rises, and interest rates rise. b. rises, and interest rates fall. c. falls, and interest rates rise. d. falls, and interest rates fall. 14. Using the liquidity-preference model, when the Central Bank increases the money supply, a. the equilibrium interest rate decreases. 48Explanation / Answer
Answer 8:- a) currency, demand deposits, money market mutual funds.
Currency is most liquid as it is the cash in hand. Thus also known as zero money. Demand deposits are also very liquid as they are available on demand of the depositor. Both currency and demand deposits are considered in M1 money supply whereas money market mutual funds is less liquid and not forms part of M1.
Answer 9:- b) discount rate.
It is the minimum lending rate set by the central bank for lending to other banks and financial institutions.
Answer 10:- b) increase, which makes the value of money decrease.
By open market purchases central bank buys the govt securities from the bank and in turn gives them money, thus it increases the money supply. Increase in money supply leads to decrease in its value.
Answer 11:- c) negative, and its saving is larger than its domestic investment.
When net capital outflow is positive, it shows that the net exports are negative i.e., resident of that country have purchased more foreign goods than the non residents purchased goods of that country.
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