In a fractional reserve banking system,
A. the fraction of deposits that must be held is determined by the required reserve ratio.
B. the required reserve ratio is set by the Federal Reserve System.
C. banks hold reserves equal to only a fraction of their deposits.
D. All of these responses are correct.
Answer: D
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Suppose a vote was taken in a small town of 11 people to determine how much of the budget should go toward education spending. Five individuals want 10 percent, five individuals want 80 percent and one person wants 25 percent. According to the median-voter theorem, the chosen amount to spend on education will be ______ of the budget.
A. 10 % B. 80 % C. 45 % D. 25%
Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has
a. caused GDP to fall. b. not caused any change in GDP. c. caused GDP to rise. d. probably changed GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.
For a firm operating in a competitive industry, which of the following statements is not correct?
a. Price equals average revenue. b. Price equals marginal revenue. c. Total revenue is constant. d. Marginal revenue is constant.
The most common measure of productivity shocks used by real business cycle theorists is
A. average labor productivity. B. the change in the capital stock. C. the Solow residual. D. unit labor costs.