Refer to the information. With the $40 billion deposit, the banking system will be able to expand the money supply through loans by:
Answer the question on the basis of the following information about a banking system: new
currency deposited in the system = $40 billion; legal reserve ratio = 0.20; excess reserves
prior to the currency deposit = $0.
A. $160 billion.
B. $200 billion.
C. $40 billion.
D. $128 billion.
A. $160 billion.
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Unanticipated deflation can create unemployment if
A) nominal wages are sticky, causing real wages to rise over time. B) nominal wages are flexible, causing people's real incomes to decline. C) banks refuse to make loans at low nominal interest rates. D) nominal interest rates remain positive.
Which of the following is NOT true of adverse selection?
A) It would not exist in a world of perfect information. B) It arises because borrowers typically know more than lenders. C) It describes a lender's problem of distinguishing the good-risk applicants from the bad-risk applicants. D) It describes a lender's problem in verifying borrowers are using their funds as intended.
Which of the following is NOT a predictable result of a price ceiling set below the market clearing price?
A) an illegal market in the good B) excess quantity supplied C) excess quantity demanded D) lines to purchase the product
Specialization and trade can make everyone better off if a person can obtain goods at prices that are less than that person's opportunity cost
a. True b. False Indicate whether the statement is true or false