Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent
When the reserve requirement is less than 100 percent, banks can lend out deposits. The money they lend out is redeposited. In this way, deposits can be greater than reserves. Since deposits are greater under fractional-reserve banking and since deposits are part of the money supply, the money supply will be greater under fractional-reserve banking.
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In the aggregate expenditures diagram, the ________ line relates planned aggregate expenditure to output and the ________ line represents the condition that aggregate expenditure (AE) equals equilibrium output (Y).
A. 45°; aggregate expenditure B. consumption function; 45° C. aggregate expenditure; 45° D. 45°; consumption function
The concept of “random walk” applies most closely to forecasts of
A. consumer demand for a product after a price increase. B. the effects of a tax on the supply of oil. C. the effects of transfer payments on labor supply. D. the price of a particular stock one year from now.
The rate a bank pays for deposit insurance should be independent of the investments undertaken by the bank with depositors' funds
Indicate whether the statement is true or false
The marginal benefit of the pollution abatement curve
A) has a zero slope. B) has a positive slope. C) slopes upward. D) slopes downward.