How does a central bank influence the lending capacity of the banks?
What will be an ideal response?
A central bank can influence the lending capacity of the bank by varying minimum required reserve ratio. Reserve requirements affect the potential of the banking system to create credit, which is a part of money supply. Rising of minimum required reserve ratio will reduce the excess reserve with the bank. It will reduce their credit creation capacity, and therefore lowers the money supply and increases the interest rate. Similarly, lowering the required reserve ratio will increase the interest rates and set off a multiple expansion of the banking system.
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The burdens of the national debt generally fall on
A) the present generation. B) past generations. C) future generations. D) all of the above.
Long-distance travel by bus is an inferior good. As people's incomes increase and other things remain the same, you predict that the
A) price of long-distance travel by bus will fall and the demand for long-distance travel by bus will increase. B) price of long-distance travel by bus will fall. C) demand for long-distance travel by bus will decrease and the price will rise. D) demand for long-distance travel by bus will increase as the price of long-distance travel by bus falls.
Use Figure 13.2 which depicts a monopolist firm to help with the following question. Define the area of total costs that this firm will incur if it is maximizing profit. Use the letters that appear on the graph to identify the area
What will be an ideal response?
One important similarity among the European economies is
a. the very minor role played by the state in almost all cases. b. the unimportance of safety nets to provide income and employment security. c. the almost total absence of subsidization by the state. d. their common constitutional history e. the high share of transfers for the welfare state.