Question

The notion that recessions and depressions are caused by an unequal distribution of wealth was part of the theory of:

Multiple Choice

• Karl Marx

• Friederich Hayek

• John Maynard Keynes

• Adam Smith

Upturn or positive phases of the business cycle include all of the following EXCEPT:

Multiple Choice

• Recovery

• Trough

• Peak

• Expansion

The simple money multiplier is flawed because:

Multiple Choice

• It assumes an infinite number of banks

• It assumes nobody carries cash

• It assumes banks engage in micro-lending

• All of the Above

The M1 Money Supply is equal to Currency in Circulation plus:

Multiple Choice

• Savings Accounts

• Demand Deposit Accounts

• Time Deposit Accounts

• Safety Deposit Boxes

M2 Money Supply is equal to M1 but also includes:

Multiple Choice

• Savings Accounts and Personal Money Market Mutual Funds

• Gold and Silver Bars

• Credit Cards

• Safety Deposit Boxes

Answer 1

a. Karl Marx

b. Trough

Trough is the lowest point in the business cycle in negative phase which can be seen in following picture.

b. It assumes nobody carries cash

It is assumed that public does not hold any cash and every penny is in bank which leads to credit creation and expansion of money supply but public hold cash in actual.

b. Demand Deposit Accounts

M1 = coins and currency in circulation + checkable (demand) deposit + traveler's checks.

a. Savings Accounts and Personal Money Market Mutual Funds

M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits.