Tackle the Test: Free-Response Questions

253

  1. Question

    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
    How will each of the following affect the money supply through the money multiplier process? Explain.

    Rubric for FRQ 1 (6 points)

    1 point: It will decrease.

    1 point: Money held as cash does not support multiple dollars in the money supply.

    1 point: It will decrease.

    1 point: Excess reserves are not loaned out and therefore do not expand the money supply.

    1 point: It will decrease.

    1 point: Banks will have to hold more as reserves and therefore loan out less.

  2. Question

    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
    Suppose the required reserve ratio is 5%.