You Are Given the Following Information About the Economy of Nocoin

question 23

Multiple Choice

You are given the following information about the economy of Nocoin: The banks have deposits of $300 billion.Their reserves are $15 billion, two thirds of which is in deposits with the bank.Households and firms hold $30 billion in bank notes.There are no coins!
The banks have no excess reserves.
The Bank of Nocoin, the central bank, increases bank reserves by $0.5 billion.The quantity of money _______.
The change in the quantity of money is not equal to the change in the monetary base because _______.
The money multiplier is _______.

• A)increases; the monetary base includes bank deposits; 7.0
• B)increases; when bank reserves increase, banks loan out their excess reserves and a multiplier process ensues; 7.33
• C)decreases; an increase in monetary base brings about a decrease in the quantity of money; 7.33
• D)decreases; money includes currency, but the monetary base does not include currency; 7.0
• E)increases; the components of the monetary base are not the components of the quantity of money; 7.0

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Definitions:

Controlled Group

A group of two or more entities that are connected through common ownership, allowing for centralized control and management.

Controlled Entities

These are entities over which another entity (the parent) has control, typically through ownership of more than half of the voting rights or through other mechanisms.

Associates

An entity over which an investor possesses significant influence, typically characterized by owning between 20% and 50% of the voting stock.