Jared Read an Article That Showed a Dramatic Increase in Money

question 35

Multiple Choice

Jared read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Jared can conclude that for the past quarter

• A) both the M-1 and M-2 money supplies were stable.
• B) the M-1 money supply has increased, but the M-2 money supply was stable.
• C) the M-2 money supply has increased, but the M-1 money supply was stable.
• D) both the M-1 and the M-2 money supplies have increased.

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Definitions:

Multiplier

In economics, a factor by which an increase in spending leads to a greater increase in national income.

Open-market Purchase

Transactions where central banks buy securities in the open market to increase the money supply and stimulate economic activity.

Interest Rates

The cost of borrowing money or the return earned from lending money, often expressed as a percentage of the principal.

Aggregate Demand

The aggregate need for various products and services across an economy at varying price points, throughout a particular timeframe.