What are the constraints on deposit creation for the banking system?
What will be an ideal response?
Deposit creation is contingent upon several factors. In order for the banking system to create money, businesses and individuals must deposit money in transactions accounts, and there must also be a willingness on the part of businesses and individuals to borrow money from banks. The Federal Reserve can limit deposit creation by increasing the reserve requirement. The more money that is in circulation, the less that can be in bank vaults acting as reserves to create more loans and thereby increase the money supply. This is why banks encourage the use of debit cards over checks, credit cards, and cash for purchases.
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Suppose the interest rate is 5 percent per year. The present value of $210 to be received one year from today is
A) $200.00. B) $210.00. C) $215.00. D) $220.50.
Capital can be treated as a free resource
Indicate whether the statement is true or false
Health and safety regulations in the labor market:
A. should be evaluated by comparing their costs to their benefits. B. can lead to an increase in frictional unemployment. C. are necessarily inefficient if they impose additional costs on employers. D. are always efficient because they improve working conditions.
Lucinda is a farm owner who believes the market price for her crops is insufficient to cover her expenses and make a worthwhile profit. Which government action on farm goods would Lucinda most likely support?
a. price decreases b. price ceilings c. price floors d. price maximums