A bank has a reserve requirement of 10 percent. This means that if a customer deposits $10,000, the bank may increase lending by:
A. $11,000.
B. $1,000.
C. $10,000.
D. $9,000.
Answer: D
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A currency system in which exchange rates are determined in free markets is called a
A) gold standard. B) flexible exchange rate system. C) fixed exchange rate system. D) all of the above
Assume the economy is initially in equilibrium where potential GDP is greater than real GDP
If the expected inflation rate, the term structure effect, and the default-risk premium are constant, a decrease in the Fed's target short-term nominal interest rate will ________ the MP curve and the output gap will become ________. A) shift up; smaller B) shift up; larger C) shift down; smaller D) shift down; larger
According to Ricardian equivalence, the key consequence of an increase in the budget deficit that arises from a tax cut is ________
A) a decrease in private investment B) an increase in inflation C) an increase in the public's holding of government bonds D) an increase in the supply of money
Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?
a. U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment b. U.S. imports, U.S. interest rates, the real exchange rate of the dollar c. U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment d. the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports