Sam withdraws $500 from his chequing account at the Bank of Montreal. He keeps $100 in cash and deposits $150 into his savings account at the Bank of Montreal and deposits the remaining $250 into his savings account at Canada Trust. Immediately, M1 ___________ and M2+____________.

decreases by $100; increases by $100
decreases by $400; does not change
does not change; increases by $400
does not change; does not change

Banks in the land of Nod have total deposits of $3 million, an actual reserve ratio of 10 percent, and loans to households and firms of $2 million. They have no net worth. Total assets of the banks are __________ and total reserves are __________.

$3 million; $300,000
$2 million; $1 million
$1 million; $2 million
$300,000; $300,000

The chartered banks on Sunny Island have $3 million in demand deposits, reserves of $600,000, loans of $2 million, some other assets, and net worth of $1 million. The banks hold no excess reserves. The desired reserve ratio is ____________ and the deposit multiplier ___________.

0.6; 1.7
0.2; 5.0
0.3; 3.3
5.0; 0.2

You've decided to immigrate to Banana Isle. You take your total life savings of $500 and deposit the $500 into the only bank on Banana Isle. The bank's desired reserve ratio is 20 percent. After the bank has made 3 loans, it has created __________ of new money and its reserves have increased by _____________.

$1,476; $244
$1,220; $244
$976; $244
$500 plus interest; $100

You've decided to immigrate to Banana Isle. You take your total life savings of $500 and deposit the $500 into the only bank on Banana Isle. The bank's desired reserve ratio is 20 percent. When the bank in Banana Isle has reduced its excess reserves to zero, the quantity of loans made by the bank is ______________.

$500
$2,000
$625
$2,500

In the land of Oz the monetary unit is the emerald. Households and firms in Oz currently hold 100,000 emeralds. The price level is 100. If the price level jumps to 110 and other things remain the same, households and firms will ____________.

not change the amount of money they hold
decrease the money they hold by 10,000 emeralds
increase the money they hold by 1,000 emeralds
increase the money they hold by 10,000 emeralds

A new financial innovation results in people switching their money from demand deposits to savings accounts. The demand for M1 _____________ and the demand M2+ _____________.

decreases; increases
decreases; does not change
increases; decreases
decreases; decreases

In Buckingham, the real money supply is $1 million and the price level is fixed. When the interest rate is 0 percent, people demand $2 million of real money but for each 1 percentage point increase in the interest rate, people plan to reduces the money they hold by $200,000. The equilibrium interest rate is ______________ a year.

5 percent
10 percent
4 percent
6 percent

If households and firms find that their holdings of real money are more than desired, they will _______ financial assets and there will be a _______ the money demand curve.

purchase; leftward shift of
sell; movement along
purchase: movement along
sell; rightward shift of

Other things remaining the same, a rise in the interest rate brings ____________ and __________ .

a rise in the exchange rate; a decrease in net exports
an increase in the money supply; a decrease in the interest rate
a fall in the exchange rate; an increase in net exports
a decrease in the money supply; an increase in net exports

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