Why is the Fed referred to as the "lender of last resort"?
What will be an ideal response?
Sometimes the federal funds market can fail. For example, during a financial panic, banks with excess reserves do not know who they can trust. They don't know which banks are solvent and which banks are not. Accordingly the banks with excess reserves may be unwilling to lend these reserves out. In such a crisis, the Fed can step in and provide reserves to the banks that need them and is hence referred to as the "lender of the last resort."
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According to Keynes, the consumption-income relationship is shown as C = a + bYD. Therefore, the saving-income relationship is
a. S = a + (1 ? b)YD. b. S = ? a + (1 ? b)YD. c. S = a + (1 ? b)/YD. d. S = ? a + (1? b)/YD.
Assume that an economy experiences both positive population growth and technological progress. Once the economy has achieved balanced growth, we know that the output per effective worker ratio (Y/NA) is
A) growing at a rate of 0. B) growing at a rate of gA + gN. C) growing at a rate of gN. D) growing at a rate of gA. E) none of the above
________: the situation where equilibrium GDP is less than full employment output
Fill in the blank(s) with correct word
If a positive externality is to be taken full advantage of, the:
A. consumer of the good should receive a subsidy equal to the marginal cost imposed on third parties that results from production (or consumption) of the good. B. producers' marginal costs should be decreased by an amount equal to the marginal cost imposed on third parties that results from production of the good. C. consumer of the good should pay a tax equal to the marginal benefit to third parties that results from production (or consumption) of the good. D. producers' marginal costs should be increased by an amount equal to the marginal benefit to third parties that results from production of the good.