Fall 2019 Economics 2100 MY9 Final Exam Version The Tobin money demand model implies that a reduction in interest rates will: cause desired money holdings to rise cause desired money holdings to fall cause desired bond holdings to rise have no impact on desired money holdings Suppose that there is excess supply of money at the current interest rate. During the adjustment process: interest rates and bond prices will both rise interest rates will rise and bond prices will fall interest rates will fall and bond prices will rise interest rates and bond prices will both fall Let RR denote the required reserve ratio. The money (bank) multiplier is equal to: a) b) 1 – RR RR – 1 1/(1-RR) 1/RR 17. The interest rate that the Federal Reserve charges banks to borrow reserves is the: a) b) federal funds rate discount rate prime rate exchange rate d) 18. The interest rate that banks charge each other to borrow reserves is the: federal funds rate discount rate prime rate exchange rate d) 19. A reduction in the required reserve ratio will: b) increase the money supply and raise interest rates increase the money supply and lower interest rates reduce the money supply and raise interest rates reduce the money supply and lower interest rates

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