If banks engage in fractional reserve banking, it means that
A. they hold less than 100 percent of their deposits as reserves.
B. they never run short of currency.
C. a fraction of their legal reserves are held as top-grade government securities.
D. they do not hold any excess reserves.
Answer: A
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If marginal revenue and marginal cost are not equal, profit can be maximized by
A. increasing output if MR > MC. B. decreasing output if MC > MR. C. moving to the output where the slopes of TR and TC are equal. D. All of the responses are correct.
Within the simple Keynesian Cross model, equilibrium takes place: a. at full employment
b. when aggregate spending equals real disposable income. c. when the money interest rate and real interest rate are equal. d. when actual and expected rates of inflation are equal.
Callie has just graduated from Hairs-R-Us Beauty School with a license to cut hair. She can earn $15 an hour styling hair at the local hair salon or $20 an hour styling hair at the local funeral home. The higher wage offered by the funeral home is an example of
a. a human capital differential. b. a compensating differential. c. signaling theory. d. the superstar phenomenon.
Which of the following would most likely cause a shift to the right in Graph B?
a. a change from Q1 to P1 in Graph A
b. a change from P2 to P1 in Graph A
c. a change from P1 to P2 in Graph A
d. a change from Q2 to Q1 in Graph A