Which of the following explains why banks try to keep their holdings of excess reserves low?
A. To escape Fed penalties.
B. To please bank examiners.
C. To keep the money multiplier low.
D. To maximize profits.
Answer: D
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Suppose there are only two goods: food and clothing. What does it mean for the U.S. to have a comparative advantage in food production?
a. The U.S. needs fewer resources to grow a given amount of food than do other nations. b. The U.S. sacrifices less clothing production to grow a given amount of food than do other nations. c. In the U.S., food production needs fewer resources than does a comparable amount of clothing production. d. In the U.S., food production costs less than does clothing production.
Legislators facing a close electoral contest will tend to favor
A) policies with benefits greater than costs for everyone. B) policies with benefits greater than costs for the majority. C) policies with benefits in the near future and deferred costs. D) policies representing the public interest.
The costs to firms of changing prices are called menu costs
Indicate whether the statement is true or false
When the Federal Reserve sells government bonds to the public, it directly
a. increases the M1 money supply and increases the reserves of the commercial banking system. b. increases the M1 money supply, while reducing the reserves of the commercial banking system. c. reduces the M1 money supply, while increasing the reserves of the commercial banking system. d. reduces the M1 money supply and decreases the reserves of the commercial banking system.