Suppose you found 5,000 hidden in your closet and deposited it in a demand deposit account at your bank. If the reserve requirement was 10 percent, the deposit would directly create ____ in excess reserves and ultimately lead to a ____ total increase in the money supply, if all banks in the system lend out 100 percent of their excess reserves.
a. 500; 5,000
b. 4,500; 5,000
c. 4,500; 45,000
d. 4,500; 50,000
Question 2
Which of the following schools of thought stressed on a fixed-price model for macroeconomic equilibrium?
a. Traditional Keynesians
b. New Keynesians
c. Monetarists
d. Classical economists
e. New classical economists
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