If the public decides to hold more currency and fewer deposits in banks, bank reserves
a. decrease and the money supply eventually decreases.
b. decrease but the money supply does not change.
c. increase and the money supply eventually increases.
d. increase but the money supply does not change.
a
You might also like to view...
During a recession, the unemployment rate
A) is, by definition, above 25 percent. B) is, by definition, above 10 percent. C) usually increases but not necessarily to 10 percent or 25 percent. D) remains constant. E) usually decreases.
If the government begins to run a larger budget deficits, then assuming there is no Ricardo-Barro effect, the demand for loanable funds ________ and the real interest rate ________
A) decreases; falls B) decreases; rises C) increases; rises D) increases; falls
This question concerns the mechanism of a reserve currency standard. Two countries, X and Y, have two currencies, x and y, fixed to the reserve currency, the U.S. dollar. Suppose the exchange rate between x and the U.S. dollar is 3x per dollar
Suppose the exchange rate between y and the U.S. dollar is 5y per dollar. Explain (using numbers) the mechanism if the x-y exchange rate was 0.5 x per y.
If the backward-bending supply curve for labor has relevance for public finance, it is because _____
a. at really high wage rates there will be insufficient labor to meet aggregate demand b. there is a trade-off between leisure and labor c. income taxes do no raise sufficient revenue to pay for public goods because individuals consume too much leisure d. taxpayers are not receiving as much utility from public sector output as they are losing through the income effect associated with income taxes