ECON 303 Chapter 15 Quiz



1. Suppose DDO total $1,000 billion and Cp totals $100 billion. Then k is

a. 0.08

b. 0.001

c. 0.1

d. 0.081
 
 

2. Holding other factors constant, an increase in which of the following will reduce the size of the money supply multiplier?

a. R

b. B

c. Cp

d. none of the above
 
 

3. If the public comes to fear major bank failures and a breakdown of the deposit insurance system, then

a. k would fall

b. B would fall

c. B would rise

d. re would rise
 
 

4. At a recent FOMC meeting, the discount rate was increased by one-half percent. Given other factors, this should lead to

a. an increase in re

b. a decrease in re

c. no change in re
 
 

5. Given other factors, which of the following will increase the money supply multiplier (M1/B)?

a. the Fed reduces reserve requirements

b. banks become more aggressive lenders, reducing re

c. the currency ratio falls as banks boost rates paid on deposits

d. all of the above
 
 

ANSWER KEY 1b, 2c, 3d, 4a, 5d