Answer the following statements true (T) or false (F)
1. During a recession when banks tend to increase their excess reserves, the money supply M1 decreases.
2. While the withdrawal of cash from banks does not affect money supply immediately, it will affect the banking system's lending capacity which will eventually lead to a contraction in money supply.
1. True
2. True
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Explain whether it is possible for a country to have a comparative advantage in the production of a product without having an absolute advantage in the production of that product
What will be an ideal response?
The time and money spent by a monopoly firm on lobbying for favorable government policies is called
a. the capitalized value of the firm b. limit pricing c. rent-seeking activity d. administered pricing e. implicit cost
Initially a bank has a required reserve ratio of 15 percent and no excess reserves. If $10,000 is deposited in the bank, then, ceteris paribus,
A. This bank can increase its loans by $1,500. B. This bank can increase its loans by $8,500. C. Total reserves will increase by $8,500. D. Required reserves will increase by $10,000.
According to public choice theorists, people behave differently in the market sector than in the public sector because
A) the more people there are in the market sector the less influence they are able to exert, whereas the more people there are in the public sector the more influence they are able to exert. B) the fewer people there are in the market sector the less influence they are able to exert, whereas the fewer people there are in the public sector the more influence they are able to exert. C) self-interest is the motivating force in the market sector, whereas altruism is the motivating force in the public sector. D) altruism is the motivating force in the market sector, whereas self-interest is the motivating force in the public sector. E) institutional arrangements are different in the two sectors.