Suppose that the actual money multiplier equals the maximum potential money multiplier. If the reserve ratio is 10 percent, in order for the banking system to increase deposits by $2.5 million, the Fed must
A) permit the system to have prolonged reserve deficiencies.
B) sell $2.5 million of government securities to the general public.
C) sell $250,000 of government securities to the general public.
D) buy $250,000 of government securities from the public.
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Which of the following is an appropriate policy for a central bank to follow if the economy is plagued with deflation?
A) using contractionary monetary policy to drive up interest rates B) gradually raising the required reserve rate C) increasing the target interest rate on overnight loans D) consistently pursuing policy to promote the credibility of the central bank
When the economy goes into a recession, there's an increase in
A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) voluntary unemployment.
Long-run economic rent or profit do not exist for fixed factors like land because
A) bidding drives up the price of the factor until no economic rent exists. B) there is no market for such factors. C) these factors have L-shaped isoquants. D) these factors will earn economic profits.
Suppose that the Consumer Price Index increased from 100 to 120 between 2011 and 2012. Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise?
a. 30 percent b. 16.7 percent c. 8.33 percent d. 12 percent