Lowering the discount rate will
A) increase reserves, encourage banks to make more loans, and increase the money supply.
B) decrease reserves, encourage banks to make fewer loans, and increase the money supply.
C) decrease reserves, encourage banks to make fewer loans, and decrease the money supply.
D) increase reserves, encourage banks to make more loans, and decrease the money supply.
A
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A higher real rate of interest ________ the reward for saving and ________ the amount people need to save to reach a given target.
A. decreases; decreases B. increases; increases C. increases; decreases D. decreases; increases
The formula for price elasticity of demand that is used in practice
A. usually drops all minus signs. B. usually takes on different values at different points on the demand curve. C. may calculate the percentage change in price between P1 and P2 as “(P2 ? P1) as a percentage of (P1 + P2)/2.” D. All of the responses are correct.
In the short-run, an increase in government purchases will cause
A) a shift of the DD curve to the left and an increase in output. B) a shift of the DD curve to the right and a decrease in output. C) a shift of the DD curve to the left and a decrease in output. D) a shift of the DD curve to the right and an increase in output. E) a shift of the DD curve the left and an appreciation of the currency.
Give an example that shows price inelasticity of supply. Avoid using examples from the text.
What will be an ideal response?