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ECO-111-2/3-INTRODUCTORY MACROECONOMICS-Spring 2025

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For each of the following events, would it shift the Aggregate Demand curve left or right?

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Which of the following causes the LRAS curve to be perfectly vertical?

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Continuing from the previous question, this lent-out money then is spent and eventually ends up in the hands of recipients; those people & businesses then hold onto some as cash, and deposit some into their own checking accounts, repeating the cycle.

This cycle repeats infinitely. In the end, how much money is created from the original $100,000 open-market operation? (Enter your answer to the nearest dollar. Do as little rounding as you can before then!)

(The Currency Drain Ratio (C/D) is 0.25, and the Reserve Ratio (R/D) is 0.1.)

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The Velocity of Money is...

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From the following information, calculate the money multiplier. (Assume that M1 = "the money supply".) (Enter your answer to at least 3 decimal places.)

Paper dollars and coins held by public (not

in

banks’ vaults)

$3 trillion

Paper dollars and coins in banks’ vaults (reserves)

$2 trillion

Banks’ accounts at the Federal Reserve

$6 trillion

Checking deposits

$7 trillion

Savings deposits

$14 trillion

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