Answer the next question on the assumption that the legal reserve ratio is 20 percent. Suppose that the Fed sells $500 of government securities to commercial banks buys $500 of securities from individuals, who deposit the cash in checking accounts.
As a result of the above transactions, reserves in the banking system will:
A) remain unchanged
B) rise by $100
C) fall by $100
D) rise by $1000
Ans: A) remain unchanged
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A shock that could trigger an expansion is a
a. large increase in oil prices b. financial crisis c. sudden cutback in military spending d. large decrease in oil prices e. sudden increase in the interest rate
A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?
a. The pollution will be created by those least willing and able to pay the damages. b. The pollution will be created by those most willing and able to pay for the right to pollute. c. The funds collected by the government will be enough to compensate any individuals harmed by the pollution. d. Pollution will increase from zero to 1,000 units per day. e. There will be no incentive for polluters to try to sneak emissions past government monitoring devices.
It can be argued that the minimum jobs proposal is preferable to a minimum wage law because:
a. it provides more job opportunities to women. b. it cannot be overturned by the federal government. c. it puts a floor on the wage as well as on the nature of the job. d. it applies to students and non-students.
A company’s obligation to bondholders ______.
a. comes before its obligation to stockholders b. is largely symbolic and unenforceable c. comes after its obligation to preferred stockholders d. comes after its obligation to common stockholders