Answer the following statements true (T) or false (F)
1) In an uncontrolled or unregulated system, commercial bank lending will tend to intensify the
business cycle.
2) An individual bank can safely lend out a multiple of its excess reserves, but the banking
system can safely lend out only an amount equal to the excess reserves in the banking
system.
3) If the reserve requirement is 20 percent, the monetary multiplier will be 4.
4) The higher the reserve requirement, the lower is the monetary multiplier.
1) T
2) F
3) F
4) T
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A disadvantage of using public works to reduce unemployment is that
a. it is very difficult to end a government spending program once it develops a political constituency. b. large public works may require years to plan and get underway. c. increased government spending may not be appropriate by the time the public works project beings. d. All of these.
The exchange rate changed from € 2.5/ $ to € 2.0/ $. Therefore:
a. The euro depreciated by 25% and the dollar appreciated by 25%. b. The euro appreciated by 25% and the dollar depreciated by 20%. c. The euro depreciated by 25% and the dollar appreciated by 20%. d. The euro appreciated by 20% and the dollar depreciated by 25%. e. The euro depreciated by 20% and the dollar appreciated by 25%.
The real balance effect describes the change in
A) checking account balances that occur when the money supply increases or decreases. B) the value of physical assets (e.g., houses) that results from a change in the price level. C) the output producers produce as they attempt to balance their production in response to changes in consumers' demand. D) the value of cash holdings that results from a change in the price level. E) the balance of cash holdings that results from a change in the amount of income earned.
All of the following are methods of rationing goods EXCEPT
A) political power.
B) the profit motive.
C) first come, first served.
D) prices.