Banks, like any other business, face a world of uncertainty and they either make a profit or suffer loss. If the losses become substantial, banks can fail and that occurs when
a. all of their loans are repaid and they cannot loan out their excess reserves
b. the legal reserve requirement is raised and they have to curtail the amount of money they can lend
c. a large proportion of their loans are not repaid (loans became bad investments) and depositors want more of their demand deposits than the bank has on hand
d. excess reserves are greater than required reserves and banks have too much money in their vaults
e. interest rates go so high banks are unable to make loans
C
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If the market equilibrium quantity is less than the socially optimal quantity, one can infer that:
A. the private demand curve for the activity is above the socially optimal demand. B. the private supply curve for the activity is below the socially optimal supply curve. C. there is a negative externality associated with this good. D. there is a positive externality associated with this good.
Assume that a house is rented by four students. When it comes to keeping the house clean, each of the four roommates has an incentive to leave cleaning to the others. As a result, the house is never clean
Which of the following is the best solution to this problem of free riding? A) Assign one roommate the responsibility to keep a watch over the other students B) Require every roommate to contribute to a cleaning service C) Ask every roommate to clean the house if they dirty it D) Require each roommate to pay more toward the house rent and groceries
An open market sale by the Fed causes the value of the dollar to
A) fall, increasing net exports. B) rise, reducing net exports. C) fall, reducing net exports. D) rise, increasing net exports.
What characterizes a competitive equilibrium?
A) Markets are rationed. B) Governments stay out of the market. C) Economic agents are price-takers. D) It is costly to experiment with policies.