Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and actual reserves of $1 million, it can safely lend out:
A. $1 million.
B. $1.2 million.
C. $200,000.
D. $800,000.
C. $200,000.
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
When the investment is graphed as a function of real GDP
A) it graphs as a vertical straight line. B) it graphs as a 45-degree line starting at the indicated level of investment. C) it graphs as a negatively sloped line indicating the inverse relationship between interest rates and investment. D) it graphs as a horizontal straight line at the level of investment.
When a good is not easily excludable, what people pay for it will:
A. reflect the real value they place on it. B. exactly equal the social benefit of the good. C. not necessarily reflect the real value they place on it. D. be greater than the social benefit of the good.
Situation 37-2 Dan and Ann live in the same community and both can participate in two activities, producing and stealing. Refer to Situation 37-2. Both Dan and Ann realize that they are better off producing and not stealing from each other than producing and stealing from each other. They agree not to steal from each other. There is no enforcer of their agreement to not steal. It is likely that
A) Dan and Ann are in a prisoner's dilemma setting. B) Dan is in a prisoner's dilemma setting but Ann is not. C) Ann is in a prisoner's dilemma setting but Dan is not. D) neither Dan nor Ann is in a prisoner's dilemma setting.