What are the two conflicting goals of bankers? How do these conflicting goals get resolved in the Federal funds market?
What will be an ideal response?
First, banks are in business to make a profit just as are other businesses. They earn profits primarily on loans and by buying and selling securities. Second, banks must seek safety by having liquidity to meet the cash needs of depositors and to meet transactions as checks clear. Banks can borrow from one another to meet short-term needs for cash or reserves in the federal funds market. In this market banks borrow available reserves from other banks on an overnight basis. The rate paid is called the federal funds rate.
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If a new unit excise tax is levied on bottles of wine, the
A) demand for wine shifts to the left. B) demand for wine shifts to the right. C) supply of wine shifts to the right. D) supply of wine shifts to the left.
The rate at which aggregate supply changes to restore equilibrium at potential output depends crucially on:
a. how quickly planned investment spending adjusts to changes in population growth b. how quickly planned consumption spending adjusts to changes in the price level and nominal wages. c. how quickly technology changes to increase aggregate supply. d. whether the economy is experiencing a recessionary gap or an expansionary gap. e. how quickly real wages adjust to restore full employment in the labor market.
A tariff is a tax imposed on ________ good.
A. a luxury B. an illegal C. a domestic D. an imported
Behavior on the part of the firm that allows it to comply with the law but violate the spirit reducing the law's effect is
A. a creative response. B. the lemons problem. C. a positive-sum effect. D. a dominant strategy.