Author Question: Other things remaining the same, an increase in the real risk-free interest rate causes the velocity ... (Read 125 times)

jace · **on:** Jun 30, 2018

Other things remaining the same, an increase in the real risk-free interest rate causes the velocity of money to:
a. Rise.
b. Fall.
c. Not change.

Question 2

Suppose a national government increased its deficit and had to borrow 25 billion. The net effect on the banking system would be to:
a. Reduce bank reserves by 25 billion and reduce bank deposits by 25 billion.
b. Increase bank reserves by 25 billion and increase bank deposits by 25 billion.
c. Decrease government checking accounts in the banking system by 25 billion and increase the public's checking accounts there by 25 billion.
d. Increase government checking accounts in the banking system by 25 billion and increase the public's checking accounts there by 25 billion.
e. Increase government checking accounts in the banking system by 25 billion and reduce the public's checking accounts there by 25 billion.