Which of the following best describes how banks create money?
A) Banks charge higher interest rates on loans than they pay on deposits.
B) Banks charge fees for providing financial advice.
C) Banks create checking account deposits when making loans from excess reserves.
D) Banks make loans from reserves.
Answer: C
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If a central bank wants to keep the value of its home currency fixed in the foreign exchange market, then an increase in the demand for its home currency will lead the central bank to
A) do nothing. B) sell its home currency. C) buy its home currency. D) sell foreign currencies.
The expression "gains from trade" refers to:
A) the net benefits a country receives from trade. B) a nation's surplus of exports over imports. C) a nation's balance of trade. D) the benefits a country receives from quota protection.
The hypothesis that regulators eventually adopt policies that benefit the producers in the industry is known as the
A. capture hypothesis. B. share-the-gains, share-the-pains hypothesis. C. it's-a-rip-off hypothesis. D. producers' hypothesis.
A temporary adverse supply shock directly causes
A) a shift down and to the left of the IS curve. B) a shift to the left of the FE line. C) a shift down and to the right of the LM curve. D) a shift up and to the right of the IS curve.