If the reserve ratio is 0.10, the money multiplier is equal to 5.
Answer the following statement true (T) or false (F)
False
The money multiplier is 1/r, in this case 1/0.10 = 10.
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Assume that concerns about tap water potability increase demand for bottled water, and that the new demand (D’ ) is represented by the following: D’ = MSB’ = 7 – 0.1Q What is the new equilibrium quantity (QE’ ) and price (PE’) in the U.S. bottled water market?
Suppose that the U.S. market for bottled water is modeled as follows: S = MSC = 1 + 0.3Q D = MSB = 5 – 0.1Q, whereQ is billions of gallons per year and MSC and MSB are in dollars per gallon.
Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?
Refer to the diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:
A. cannot be achieved because resources are fully employed.
B. will cost 1 unit of computers.
C. will cost 2 units of computers.
D. will cause some resources to become unemployed.
A limitation of the discount rate as a policy tool is that the initiative for its use rests with
A) commercial banks. B) consumers. C) the U.S. Treasury. D) state governments.