Initially, the reserve ratio is 10 percent. Now banks decide they want an additional 10 percent of deposits as reserves. There are no currency drains. If the Fed buys $1 million of U.S. government securities, the money supply will
A) not change because of the excess reserves banks keep on hand.
B) increase by $1 million.
C) increase by $5 million.
D) increase by $10 million.
Answer: C) increase by $5 million.
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Consider a firm with the following cost information: ATC = $15, AVC = $12, and MC = $14 . If we know that this firm has decided to produce Q = 20 by following the rule to maximize profits or minimize losses, then the price of the output is:
a. $12. b. $14. c. $15. d. $20.
Cartel agreements are difficult to maintain because individual members:
a. can gain by raising their price above the price that is best for the cartel. b. are often unable to police the price and output policies of other members. c. can gain by secretly raising their price above the price that is best for the cartel. d. can enforce price arrangements vigorously in court.
The one-dollar, one-vote metric implies that every dollar of gain or loss is just as important as every other dollar of gain or loss, regardless of who the gainers or losers are.
Answer the following statement true (T) or false (F)
Which of the following is NOT an advantage of a partnership?
A) limited liability B) easy to form C) Profits are subject to only personal taxation. D) permits more effective specialization in occupations