A decrease in the reserve ratio increases the:
A. amount of actual reserves in the banking system.
B. amount of excess reserves in the banking system.
C. number of government securities held by the Federal Reserve Banks.
D. ratio of coins to paper currency in the economy.
B. amount of excess reserves in the banking system.
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In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?
What will be an ideal response?
Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents consumer surplus?
A) R + S B) V + W + X + Y C) R + S + V D) R + S + T + U
Which of the following conditions can help prolong the life of a cartel?
A) There are only a few firms in the market and they all belong to the cartel. B) There are many firms in the market that are not members of the cartel. C) It is difficult to know what price any cartel member is actually charging. D) The cartel has no ability to punish members who cheat on the cartel.
Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?