During the financial crisis of 2007-2009, the deposit expansion multiplier plummeted to a fraction of its normal value. Why?
What will be an ideal response?
Banks dramatically increased their excess reserve levels for two reasons. First, they were concerned that customers would demand withdrawals. Second, banks were concerned that they would not be able to borrow from other banks.
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Using the information in Situation 20-1, the equilibrium level of aggregate output is
A) $900 B) $8,000 C) $9,000 D) $10,000
A Swiss watch company advertises its history of superior craftsmanship. The company thinks that this would
a. Make the demand for the product less elastic b. Make the customers less sensitive to the price c. Assist them with differentiating their product d. All of the above
If the natural unemployment rate is 5.5 percent, then the economy is in an inflationary gap when the actual unemployment rate is
A) greater than 5.5 percent. B) less than 5.5 percent. C) 0 percent. D) 5.5 percent.
Figure 9.9 depicts a market for electricity. S1 is the supply curve without the external costs. S2 is the supply curve with the $T tax. Assume electricity production incurs external costs. If the government imposes a pollution tax of $T per mega watt:
A. the supply curve will shift to the right. B. the supply curve will shift to the left. C. demand curve will shift to the right. D. demand curve will shift to the left.