Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?
What will be an ideal response?
If banks hold excess reserves, these reserves are not loaned out. The corresponding checking account deposits are not created and neither are the additional checking account deposits from other banks that would have been created through the deposit multiplier process.
If households and firms hold currency, then banks do not get the deposits and the corresponding reserves. If the currency was deposited, the banks would create a multiple expansion of checking account deposits through the multiplier process.
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Reliance on indicators of productivity such as education, experience, and test scores may keep some very good people from getting a job and may result in hiring unproductive people. This is called:
a. worker prejudice. b. statistical discrimination. c. crowding out. d. disparate treatment. e. comparable worth.
Between 2001 and 2005, sub-prime (including Atl-A) mortgages ____________ as a share of the total
a. fell from 30 percent to less than 10 percent b. rose from 5 percent to 10 percent c. rose from 10 percent to more than 30 percent d. fell from more than 20 percent to less than 10 percent
Which of the following is NOT a property of isoquants?
A. Isoquants curves are thin. B. Isoquants may slope upward or downward. C. Isoquants for the same technology never cross. D. Higher-level isoquants lie farther from the origin.
An increase in the price of good B caused an increase in the demand for good C. This indicates that goods B and C are
A) complements. B) substitutes. C) neither substitutes nor complements. D) normal goods.