Which answer from the highlighted is correct?
1. According to Positive Money, in the traditional money multiplier model,
A. If the reserve ratio is 10%, the money supply will be about 100 times the economy's base money.
B. If the reserve ratio is 10%, the money supply will be about 10% of the output in the economy.
C. If the money multiplier is 10, a £100 increase in the money supply will increase output by £1000.
D. If the reserve ratio is 10%, the money supply will be about 10 times the base money in the economy.
E. If the money multiplier is 10, a £100 increase in government spending will increase output by £1000.
2. According to Positive Money, in 2006, for the British pound, bank-created money was
A. zero, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
B. 14 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
C. 80 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
D. negative, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
E. 14 times base money, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
3. Consider the risk premium, as defined in the lecture and in the textbook. If the domestic central bank has a fixed exchange rate policy that the markets find credible, then
A. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is zero.
B. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is nonzero.
C. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is negative.
D. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is positive.
E. Nominal interest rates in the domestic country and the foreign one cannot be the same, even if that risk premium is zero since there is another term in the uncovered interest parity formula.
Which answer from the highlighted is correct?
1. According to Positive Money, in the traditional money multiplier model,
A. If the reserve ratio is 10%, the money supply will be about 100 times the economy's base money.
B. If the reserve ratio is 10%, the money supply will be about 10% of the output in the economy.
C. If the money multiplier is 10, a £100 increase in the money supply will increase output by £1000.
D. If the reserve ratio is 10%, the money supply will be about 10 times the base money in the economy.
E. If the money multiplier is 10, a £100 increase in government spending will increase output by £1000.
2. According to Positive Money, in 2006, for the British pound, bank-created money was
A. zero, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
B. 14 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
C. 80 times base money, and it was 14 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
D. negative, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
E. 14 times base money, and it was 80 times base money after the latest global financial crisis and the Bank of England's quantitative easing.
3. Consider the risk premium, as defined in the lecture and in the textbook. If the domestic central bank has a fixed exchange rate policy that the markets find credible, then
A. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is zero.
B. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is nonzero.
C. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is negative.
D. Nominal interest rates should be the same in the domestic country and the foreign one only if that risk premium is positive.
E. Nominal interest rates in the domestic country and the foreign one cannot be the same, even if that risk premium is zero since there is another term in the uncovered interest parity formula.
