FINANCIAL AWARENESS QUIZ 7 for SEBI and Other Regulatory Body Exams

Please enter your email:

The ________ the amount of excess reserves a bank holds, the ________ the size of the deposit multiplier.

smaller; smaller

greater; smaller

smaller; larger

greater; larger

None of the above

If the reserve ratio is 0.05 then the simple deposit multiplier is

None of the above

The ________ the reserve ratio, the ________ the simple deposit multiplier.

larger; larger

smaller; larger

smaller; smaller

smaller; greater likelihood there is no change in

None of the above

If banks do not loan out all their excess reserves then the real world multiplier is

larger than 1/RR.

not related to 1/RR.

equal to 1/RR.

smaller than 1/RR.

None of the above

Suppose a bank is exactly meeting its required reserve ratio of 10 percent and a new deposit of $75,000 is made. immediately after the deposit is made, the excess reserves will be

$7,500

67,500

Zero

impossible to determine given the limited information.

None of the above

Money demand will decrease if the price level ________ or if real GDP ________.

increases; increases

decreases; increases

decreases; decreases

increases; decreases

None of the above

The money demand curve is downward sloping because

lower interest rates cause households and firms to switch from money to financial assets.

lower interest rates cause households and firms to switch from financial assets to money.

lower interest rates cause households and firms to switch from money to bonds.

lower interest rates cause households and firms to switch from money to shares.

None of the above

Increases in the price level

increase the quantity of money needed for buying and selling.

increase the opportunity cost of holding money.

decrease the opportunity cost of holding money.

decrease the quantity of money needed for buying and selling.

None of the above