Suppose a person cashes his payroll check and holds all the funds in the form of currency. Everything else held constant, total reserves in the banking system ________ and the monetary base ________
A) remain unchanged; increases
B) decrease; increases
C) decrease; remains unchanged
D) decrease; decreases
C
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Which of the following statements is TRUE about profits?
A) Profits are considered a cost of doing business. B) Profits are excluded from the circular flow of the income diagram. C) The only portion of profits that are included in the circular flow diagram are the portion paid out in the form of dividends. D) Profits are considered one of the resources necessary for production.
A bank is insolvent when:
A) its total assets exceed its total liabilities. B) its stockholders' equity exceeds its total assets. C) its stockholders' equity exceeds its total liabilities. D) its total liabilities exceed its total assets.
Conditions that likely contributed to a credit crunch during the global financial crisis include
A) capital shortfalls caused in part by falling real estate prices. B) regulated hikes in bank capital requirements. C) falling interest rates that raised interest rate risk, causing banks to choose to hold more capital. D) increases in reserve requirements.
Refer to the above figure. If government sets the maximum legal price of gasoline at $2 per gallon, then the $2 limit acts as
A) a price floor. B) a price ceiling. C) an equilibrium price. D) a just price.