Suppose the Federal Reserve System has a required reserve ratio of 0.10 and there are no excess reserves in the system. If the Open Market Committee buys $50 million of securities from the commercial banking system, the total lending capacity for the system
A. Increases by $500 million.
B. Decreases by $500 million.
C. Decreases by $50 million.
D. Increases by $50 million.
Answer: A
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The Compensating Variation for an increase in the price of a good is
A) the minimum amount of money a consumer would accept to voluntarily accept the price increase. B) the maximum amount of money a consumer would pay to avoid the price increase. C) the change in consumer surplus resulting from a price increase. D) the change in utility resulting from the increase in price.
The longer the time frame involved, the more likely it is that the demand will be relatively
A) elastic. B) inelastic. C) steep. D) flat.
Assume that a hurricane in Brazil destroys half of the coffee crop. Considering that Brazil is a major coffee producing country, consumers expect the price of coffee to increase in the near future. How does this reflect on the demand for coffee?
a. There is a movement upward along the demand curve for coffee. b. The demand curve for coffee shifts inward. c. The demand curve for coffee shifts outward. d. There is a movement downward along the demand curve for coffee. e. The demand for coffee declines.
A high proportion of the population under the age of 15 undermines economic growth because
a. the young require more infrastructure than older people b. the young require more capital goods than older people c. they present such a huge increase in human capital d. the young consume but they do not produce e. they increase per capita income