5-2 (21-24) Question 21. 21. Which type of money has intrinsic value? (Points :

Question

5-2 (21-24)

Question 21. 21. Which type of money has intrinsic value? (Points : 5) commodity money fiat money both commodity money and fiat money neither commodity money nor fiat money

Question 22. 22. If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to (Points : 5) $7,000 of new money. $8,000 of new money. $11,500 of new money. $12,500 of new money.

Question 23. 23. If the reserve ratio is 12.5 percent, the money multiplier is (Points : 5) 6.25. 8. 12.5. 25.

Question 24. 24. Demand deposits are included in (Points : 5) M1 but not M2. M2 but not M1. M1 and M2. neither M1 nor M2.

Explanation / Answer

21. Commodity Money since it is made out of precious metal which has some intrinsic value.

22. 12.5% of X=$1000

Therefore, X=$1000*100/12.5=$8000

23. Money Mutiplier=1/Reseve Requirement=100/12.5=8

24. M1 includes the most liquid of all therefore M1 but not M2

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