Fractional reserve banking is a banking system in which banks hold only a fraction of deposits as reserves.
Answer the following statement true (T) or false (F)
True
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Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund
A) make loans to the riskiest nations so that private investors will not be tempted to take a risk. B) impose tougher preconditions on borrowers. C) not make loans to risky nations because there is a high demand for funds from safer nations. D) loan only to countries that have free elections.
Total utility is maximized in the consumption of two goods by
A) maximizing expenditure on each good. B) equating the marginal utility for each good consumed. C) equating the total utility of each good divided by its price. D) equating the marginal utility per dollar for each good consumed.
Which of the following statements is positive?
A. When the Federal Reserve increases the money supply, interest rates decrease. B. Large budget deficits should be avoided. C. A tax cut that benefits low-income households is acceptable. D. Higher taxes are needed to support education.
Which of the following examples reflects product differentiation?
a. When Kerem buys ibuprofen, he always buys the same brand even though all brands use the same formula. b. Maria has to buy Happy Cow yogurt because it is the only organic yogurt a nearby store carries. c. When someone asks Lucas what brand of milk he buys, he can’t remember the name. d. Aisha has difficulty deciding what brand of lipstick to buy because they all seem so similar.