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mat1413
mat1413
08.02.2021 • 
Business

To increase tax revenue, the U.S. government imposed a 2-cent tax on checks written on bank account deposits in 1932 (in today's dollars, about 34 cents per check). Complete the following statements on the impact of this tax on the money multiplier and the money supply. a. The tax on written checks would make people likely to write checks. Thus, people might start holding more money as . This would the currency-deposit ratio.
b. Under this check tax, the money supply would have:

1. decreased, because the currency-deposit ratio increased, which in turn decreases the money multiplier.
2. increased, because the currency-deposit ratio increased, which in turn decreases the money multiplier.
3. decreased, because the currency-deposit ratio increased, which in turn increases the money multiplier.
4. not changed, because the check tax would not impact the money supply or the money multiplier.
5. increased, because the currency-deposit ratio increased, which in turn increases the money multiplier.

c. Many economists believe that the sharp decline in the in the early 1930s was at least partially responsible for the severity of the Great Depression.

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