When banks hold excess reserves, the size of the money multiplier ...

[Deast7027]

When banks hold excess reserves, the size of the money multiplier
 
  A) is less than the simple deposit multiplier would suggest.
  B) is greater than the simple deposit multiplier would suggest.
  C) is equal to the size of the simple deposit multiplier.
  D) becomes infinite.

Question 2

Given the table above, suppose consumption in period two is 35,000. Then, the interest rate rises to five percent, and period-two consumption falls to 34,900. We may infer that ________.
 
  A) the income effect is stronger than the substitution effect
  B) the substitution effect is stronger than the income effect
  C) the substitution and income effects cancel out
  D) this consumer has a binding borrowing constraint

[morganmarie791]

Answer to Question 1

A

Answer to Question 2

A