Discuss the fractional reserve system and why it is important.
What will be an ideal response?
Answers will vary but students should demonstrate a thorough understanding of the fractional reserve system. For example, answers should note that the fractional reserve system requires banks to hold reserves equal to some fraction of their checkable deposits. This is important because it helps banks cover withdrawal requests. If a bank cannot convert into legal tender all the funds requested, the word will spread that the bank’s checks are not convertible into lawful money, possibly causing a “run on the bank.” The bank would have to quickly convert some of its other assets into currency, or it would be unable to meet its obligations to convert its deposits into currency, and it would have to close.
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If the United States' largest bakery buys an agricultural firm that specializes in growing wheat, we would have an example of
A) a horizontal merger. B) a vertical merger. C) a monopoly. D) excessive product differentiation.
An increase in the corporate profits tax will most likely lead to
a. a decrease in the rental rate of capital in the corporate sector. b. no change in the rental rate of capital in the corporate sector. c. no change in the rental rate of capital in the non-corporate sector. d. an increase in the rental rate of capital in the corporate sector.
The unemployment rate will never be zero because the economy is dynamic and always changing.
Answer the following statement true (T) or false (F)
The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare Bird Company sells three macaws, its marginal revenue is $30. When the Rare Bird Company sells four macaws, its marginal revenue will be
A. greater than $30. B. less than $30. C. equal to $30. D. greater than $30 if demand is elastic and less than $30 if demand is inelastic.