What happens to the monetary base if people, fearing a bank run, convert their checking deposits into currency holdings?
What will be an ideal response?
The monetary base itself does not change. The monetary base is made up of non-bank (public) currency and reserves. When people withdrawal funds from their checking accounts banking system reserves decrease but are immediately replaced by increases in currency so the amount in the monetary base is not changed.
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A decrease in the price of a substitute shifts the demand curve to the _______
a. right b. left c. it does not change the demand curve d. none of the above
What motivates the actions of entrepreneurs in markets?
A) profits. B) cost savings. C) revenue. D) prestige.
If the marginal propensity to consume is 0.75 and the desired amount of increase in real GDP is $240 billion, then by how much would government spending have to increase?
a. $240 billion b. $80 billion c. $60 billion d. $30 billion
Suppose the U.S. supply of loanable funds shifts left. This will
a. increase U.S. net capital outflow and increase the quantity of loanable funds demanded. b. increase U.S. net capital outflow and decrease the quantity of loanable funds demanded. c. decrease U.S. net capital outflow and increase the quantity of loanable funds demanded. d. decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.