Suppose the federal funds rate is 5 percent. If the Fed decides to decrease the target for the federal funds rate from 5 percent to 4 percent, it could take:
A. a defensive action and raise reserve requirements.
B. an offensive action and reduce reserve requirements.
C. an offensive action and raise reserve requirements.
D. a defensive action and reduce reserve requirements.
Answer: B
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The amount that the bank is legally required to keep on hand is called the:
A. required reserves. B. demand deposits. C. federal funds. D. reserve ratio.
According to supply-side economists, lowering corporate income taxes
a. results in higher wages without creating higher levels of labor productivity b. creates greater income equality c. checks the expansion of real GDP and employment d. stimulates investment and spurs on economic growth e. is a disincentive to producers who rely on tax credit for investment
The idea that what's good for one person may not be good for all people is known as the
a. cause-effect fallacy.
b. fallacy of composition.
c. moral hazard problem.
d. disequilibrium position.
Whenever a regulatory system is set up, individuals or firms being regulated will figure out ways to get around these regulations. This is referred to as the law of:
A. demand. B. unintended consequences. C. diminishing returns. D. diminishing control.