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1. DEVRY ECON 545 Week 5 Quiz NEW
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1. Suppose that the reserve requirement is 5%. What is
the effect on the total checkable deposits in the
economy if banks reserves increased by $60 billion?
2. The formula for the simple deposit multiplier is?
3. (Related to Solved Problem # 1) Suppose that simple
economy produces only the following goods and
services; shoes, hamburgers, shirts and cotton.
Further, assume that all of the cotton is used in the
production of shirts.
Use the information in the following table to calculate Nominal Gross Domestic
Product ( NGDP) for 2015.
4. Why might cutting government spending as a fiscal
policy be a more difficult policy than the use of the
monetary policy to slow down an economy
experiencing inflation?
A. The legislative process works quickly
B. The government has more concentrated power than
the Fed
C. The economy may have already slowed
D. The Legislative process experiences longer delays
than monetary policy

2. 5. Suppose that Deja owns a McDonald’s franchise. She
decides to move her restaurant’s checking account to
Wells Fargo, which causes the changes shows on the
following T-account
Reserves: -$100,000 Deposits: $100,000
If the required reserve ratio is 0.05 percent and Wells Fargo currently has no excess
reserves, the maximum loan Wells Fargo can make as a result of this transaction is
6. (related to solved problem #3) Suppose the
information in the following table is simple economy
that produces only the following four goods; shoes,
hamburgers, shirts and cotton. Further, assume that
all of the cotton is used to produce shirts.
7. Suppose the economy is initially in long run
equilibrium. The Fed enacts a policy to decrease the
discount rate. In the short run, this expansionary
monetary policy will cause;
a. A shift from SRAS to SRAS2 and a movement to point
B, with a lower price level and higher output.
b. A shift from AD1 to AD2 and a movement to point B,
with a higher price level and a higher output.
c. A shift from SRAS2 to SRAS1 and a movement to
point D, with a higher price level and a lower output.
d. Shift from AD2 to AD1 and a movement to point C
with a lower price level and the same output.
8. Excess Reserves
a. Are the deposits that banks do not use to make loans
b. Are loans made at above market interest rates
c. Are reserves banks keep to meet the reserves
requirement
d. Are reserves banks keep above the legal
requirement

3. 9. A simple economy produces two goods, Apple pies
and software. Price and Quantity data are as follows;
10.Consider the following table;
11.What can we expect from the Federal Reserve Bank if
it seeks to move the economy in the direction of a
long run macroeconomics equilibrium?
a. The Fed will pursue an expansionary fiscal policy
b. The Fed will pursue a contractionary monetary
policy
c. The Fed will pursue an expansionary monetary
policy
d. The Fed will pursue a contractionary fiscal policy
What will happen to the showing indicators?
Actual Real GDP;
Potential Real GDP;
Price Level;
Unemployment
12.Suppose you deposit a $800 cash into your checking
account; By how much will the total money supply
increase as a result when the required reserve rate is
0.10?
13.The Federal Reserve cannot affect Real GDP directly,
therefore, the Fed typically uses the following as its
policy target?
a. Inflation
b. Government expenditures
c. Taxes
d. Interest rates

4. 14.If the Federal Reserve purchases $130 million worth
of US treasury bills from the public, the money
supply will
15.The unemployment rate;
a. Shows the percentage of the population that is
considered unemployed.
b. Is the amount of the labor force that is not working
c. Is the amount of people in the population that are
not working
d. Shows the percentage of the labor force that is
considered unemployed.
16.When the Federal Reserve increases the discount
rate as a part of a contractionary monetary policy,
there is;
a. A decrease in the money supply and an increase in
the interest rate
b. A decrease in the money supply and a decrease in the
interest rate
c. An increase in the money supply and a decrease in
the interest rate
d. An increase in the money supply and an increase in
the interest rate
17.Suppose the economy is in long run equilibrium, the
Fed decides to increase the discount rate, in the
short run, this contractionary monetary policy will
cause;
a. A shift from SRAS 1 to SRAS2, and a movement to
point A, with a higher price level and same output
b. A shift from SRAS 2 to SRAS 1 and a movement to
point B, with a lower price level and a higher output

5. c. A shift from AD2 to AD1 and a movement to point D
with a lower price level and lower output
d. A shift from AD1 to AD2 and a movement to point B
with a higher price level and higher output
18.According to the multiplier effect, an initial decrease
in the government purchases decrease the real GDP
by initial decrease in government purchases.
19.In an economy, the working age population is 300
million of this total;
240 million workers are employed
9 million workers are unemployed
42 million workers are not available for work
(homemakers, full time students, etc)
6 million workers are available for work, but are
discourage, and thus are not seeking work
3 million workers are available for work but are not
currently seeking work due to transportation and
child care problems.
The unemployment rate in this economy
20.Suppose you deposit $1,000 cash into your checking
account, By how much will checking deposits in the
banking system increase as a result when the
required reserve ratio is 0.40%
The change in checking deposit is equal
21.Suppose the government increases expenditures by
$110 billion and the marginal propensity to consume
is 0.80 . By how will equilibrium GDP change?
The change in equilibrium GDP

6. c. A shift from AD2 to AD1 and a movement to point D
with a lower price level and lower output
d. A shift from AD1 to AD2 and a movement to point B
with a higher price level and higher output
18.According to the multiplier effect, an initial decrease
in the government purchases decrease the real GDP
by initial decrease in government purchases.
19.In an economy, the working age population is 300
million of this total;
240 million workers are employed
9 million workers are unemployed
42 million workers are not available for work
(homemakers, full time students, etc)
6 million workers are available for work, but are
discourage, and thus are not seeking work
3 million workers are available for work but are not
currently seeking work due to transportation and
child care problems.
The unemployment rate in this economy
20.Suppose you deposit $1,000 cash into your checking
account, By how much will checking deposits in the
banking system increase as a result when the
required reserve ratio is 0.40%
The change in checking deposit is equal
21.Suppose the government increases expenditures by
$110 billion and the marginal propensity to consume
is 0.80 . By how will equilibrium GDP change?
The change in equilibrium GDP