The Fed changes the reserve requirement sparingly because:
A. sudden changes of such a huge magnitude would have far-reaching, and sometimes undesirable, effects.
B. it would cause uncertainty for banks and slow their rate of lending.
C. very small changes cause very large overall changes to money supply due to the money multiplier.
D. All of these are true.
Answer: D
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Think of the interest rate as the "price" of a home loan. Other things constant, if people expect interest rates to rise significantly over the next couple months, their willingness to purchase a home financed by a mortgage today will tend to
A) rise. B) fall. C) remain unchanged. D) do any of the above because home purchase decisions are independent of interest rates on mortgages.
If the rate of extraction of a renewable resource is greater than its rate of replenishment, the price of the resource is likely to fall in future
a. True b. False Indicate whether the statement is true or false
Which of the following conditions is true for a nation operating at a point lying inside its production possibilities curve?
a. The nation is experiencing a technological breakthrough in one of its key industries. b. The nation is clearly utilizing its resources efficiently. c. The nation is producing the maximum output that can be produced with a limited quantity of resources. d. The nation is not utilizing its resources efficiently. e. The nation is producing the maximum output that can be produced with its unlimited quantity of resources.
If the price elasticity of demand is 0.6, then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.
A. 0.6 percent decrease B. 6 percent decrease C. 6 percent increase D. 0.6 percent increase