Suppose the required reserve ratio is 8%, excess reserve-to-deposit ratio is 2%, and the currency-to-deposit ratio is 10%. What is the value of the money multiplier?
What will be an ideal response?
The money multiplier = (1 + 0.1 )/(.08 + .02 + .1 ) = 5.5
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According to the quantity theory of money, in the long run, an increase in the quantity of money does not change real GDP but does raise the price level
Indicate whether the statement is true or false
Which of the following is true with respect to the price elasticity of demand?
a. The coefficient of price elasticity of demand will change with changes in the units of measurement (for instance, going from pounds to ounces). b. Elasticity of demand is equal to the slope of the demand curve. c. Elasticity measures the sensitivity of total expenditure to a change in price of a good. d. Elasticity will tend to be greater for a relatively expensive product than for a cheaper one. e. A coefficient of 1 means that the percentage change in total expenditure is equivalent to the percentage change in price.
The factor of production that is always fixed in the short run is
a. the amount of raw materials b. the size of the physical plant c. the number of workers d. energy costs e. quantity of output
Normative economics
What will be an ideal response?