If the MPC is 0.75 and the MPM is 0.2, the open economy multiplier is 4.
Answer the following statement true (T) or false (F)
False
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When the Fed wants to raise interest rates after banks have accumulated large amounts of excess reserves, it would
A) increase the interest rate paid on excess reserves. B) increase discount rate. C) increase the required reserve ratio. D) conduct massive open market purchase.
There is much world concern over the deteriorating condition of the Pyramids and other historical structures in Egypt. While people of all nations enjoy visiting these structures, there has been little financial support for preservation coming from within Egypt or from elsewhere. Economists would describe this as an example of
a. an externality. b. a public good. c. a free rider problem. d. imperfect information.
Which of the following is not one of the ways that banks reduce transaction costs for creditworthy borrowers?
a. coping with asymmetric information b. increasing risk through diversification c. enforcing loan contracts d. These are all ways banks reduce transaction costs
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1. B. P2 and Y1. C. P2 and Y3. D. P1 and Y2.