Fractional reserve banking takes its name from the fact that:
a. banks hold only a fraction of their reserves at the bank itself.
b. banks keep only a fraction of total deposits on reserve
c. banks reserve only a fraction of their activity for lending.
d. all of the above
b
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Which is distributed more unequally, income or wealth? Why? Which is the better measure?
What will be an ideal response?
A competitive market is in equilibrium. Bagels and cream cheese are complementary goods. Suppose that the price for flour, which is used to produce bagels, increases. The equilibrium price of cream cheese ________, and the equilibrium quantity of cream cheese ________.
A) rises; decreases
B) rises; increases
C) falls; decreases
D) does not change; does not change
E) falls; increases
Explain whether you agree or disagree with the following statement: "The reason that inflation is bad is because it increases the cost of living—the costs of goods and services we buy—without increasing income in general."
What will be an ideal response?