multiple choice

1. If the Fed printed too much money, the relative price of money would: 
fall, and the money price of goods would rise.
rise, and the money price of goods would fall.
fall, and the money price of goods would fall.
rise, and the money price of goods would rise.

2. When a bank creates loans, it also creates money. 
True
False

3. The chief difference between the M1 and M2 measures of the money supply is: 
the supply of M1 exceeds the supply of M2.
M2 excludes traveler's checks.
M1 is a broader, more comprehensive measure.
M2 includes assets with a lower liquidity than those in M1.

4. Given a required reserve ratio of 10 percent for all banks and assuming individuals hold no cash, total bank reserves of $400 billion could support maximum deposits of: 
$40 billion.
$400 billion.
$1,600 billion.
$4,000 billion.