Why does the holding of excess reserves by banks and the holding of currency by households and firms cause the real-world deposit multiplier to be less than the simple deposit multiplier?
What will be an ideal response?
If banks hold excess reserves, these reserves are not loaned out. The corresponding checking account deposits are not created and neither are the additional checking account deposits from other banks that would have been created through the deposit multiplier process.
If households and firms hold currency, then banks do not get the deposits and the corresponding reserves. If the currency was deposited, the banks would create a multiple expansion of checking account deposits through the multiplier process.
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Briefly explain how growth in real GDP differs across economies including the United States, Japan, Africa, Central America, Hong Kong, Korea, and Singapore
What will be an ideal response?
Which of the following types of unemployment is the hardest to reduce?
a. Cyclical unemployment b. Structural unemployment c. Voluntary unemployment d. Frictional unemployment e. Seasonal unemployment
Unemployment benefits tend to be higher in Europe and are offered for longer periods than in the United States
a. True b. False
When the marginal revenue product of an input is less than its price, the
a. producer should expand the use of that input. b. price of the input will automatically rise in a free market. c. producer should reduce the use of that input. d. marginal physical product of that input must be below its average physical product.