In Zealand, banks' desired reserve ratio is 20 percent and there is no currency drain. The Bank of Zealand conducts a $1 million open market sale. Zealand's monetary base ___________ and the quantity of money in Zealand ________________.

decreases by $1 million; decreases by $1 million
increases by $1 million; increases by $5 million
increases by $1 million; decreases by $1 million
decreases by $1 million; decreases by $5 million

In Fair Isle, banks have no excess reserves and total desired reserves of $6 billion. $5 billion of these reserves are on deposit at the central bank. Bank notes in circulation outside of the central bank total $10 billion. Bank deposits total $50 billion. Calculate the money supply and the money multiplier in Fair Isle.

$59 billion; 3.93
$60 billion; 4.00
$66 billion; 13.20
$50 billion; 3.33

The figure shows the money market in Futureland. The desired reserve ratio is 40 percent of deposits and there is no currency drain. If the Bank of Futureland undertakes an open market purchase of $1 million of government securities, then the interest rate will ________________.

fall to 1 percent a year
remain at 6 percent a year
fall to 4 percent a year
fall to 2 percent a year

The figure shows the money market in Futureland. The desired reserve ratio is 40 percent of deposits and there is a currency drain. If the Bank of Futureland undertakes an open market purchase of $1 million of government securities, then the interest rate will be _____________________.

greater than 1 percent a year
0 percent a year
less than 1 percent a year
1 percent a year

The figure shows the money market in Tomorrowland. The Bank of Tomorrowland plans to increase the interest rate to 5 percent a year. If the money multiplier is 2 and there is no currency drain, what open market operation must the Bank undertake?

sale of $0.75 billion
sale of $1.5 billion
purchase of $1.5 billion
purchase of $0.75 billion

If a central bank wants to implement a contractionary policy it will conduct an open market operation by _______ securities. Bank reserves will _______ and bank lending will _______ leading to a _______ in the money supply.

selling; decrease; decrease; decrease
purchasing; decrease; increase; decrease
selling; increase; increase; increase
purchasing; decrease; decrease; decrease

The central bank of Cobra buys securities in an open market operation. In the short run, aggregate demand ___________, real GDP _______, and the price level _______.

increases; increases; rises
does not change; decreases; rises
decreases; decreases; falls
does not change; increases; falls

The figure shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the country of Slag. The economy is currently at point a. The Bank of Slag conducts an open market purchase of government securities. Slag moves to point _______ in the short run and to point _______ in the long run.

b; c
b; a
d; a
d; c

If a central bank wants to slow down the growth rate of real GDP and prevent inflation from increasing, the central bank will _______ the money supply and short-term interest rates will _______ relative to the long-term interest rates.

decrease; rise
increase; fall
increase; rise
decrease; fall

The 10-year government bond rate moves in the _____________short-term interest rates and fluctuates _____________.

same direction as; less
opposite direction to; more
opposite direction to; less
same direction as; more

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