Suppose the economy of Catalania is experiencing a recession and policy makers decide to implement an expansionary monetary policy. After the implementation of the policy, there is a considerable time gap before the effect of the policy on the major economic variables is noticed. This is an example of:
a. the neutrality of money.
b. an inflationary gap
c. an administrative lag.
d. an operational lag.
d
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The above figure shows the production possibility frontier for a country. What is the opportunity cost to move from point D to point E?
A) 6 thousand bottles of wine B) 15 thousand bottles of wine C) 6 tons of rice D) 9 thousand bottles of wine E) Nothing, it is a free lunch.
The figure illustrates Anne's demand for books. At ________ a book, Anne's demand for books is inelastic
A) all prices between $15 and $30 B) all prices between $10 and $15 C) all prices between $10 and $20 D) all prices below $30
Most economists believe that the best monetary policy target is
A) the money supply. B) an interest rate. C) the discount rate. D) total bank reserves.
Assume that households and businesses deposit $10,000 in this bank and that this currency is added to the bank’s reserves. In column (1) show the bank’s balance sheet after this occurs. Is there a change in the money supply? In column (2) show what would happen if the bank now loans all of its excess reserves to a depositor. Is there a change in the money supply?
Suppose the Second National Bank has the following simplified balance sheet. The reserve ratio is 25%.
