The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet?
A) Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million.
B) Securities increase by $100 million and reserves of Bank A increase by $100 million.
C) Securities increase by $100 million and reserves of Bank A decrease by $100 million.
D) Securities decrease by $100 million and reserves of Bank A increase by $100 million.
B
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A major benefit of automatic stabilizers is that they:
a. guarantee a balanced budget over the course of the business cycle. b. have a tendency to reduce the national debt. c. help increase recessionary gaps in the economy. d. moderate the effect of fluctuations in the business cycle. e. require legislative review by Congress before they can be implemented.
Other things being equal, the lower the value of elasticity:
A. the more likely the profitability of a price increase. B. the less likely the profitability of a price increase. C. the greater the responsiveness in quantity demanded to a price change. D. the lower the corresponding increase in firm revenue.
If bundles A, B, and C lie on the same indifference curve, then:
A. A ~ B ~ C. B. B > C > A. C. A > B > C. D. A ~ B > C.
Ava buys a $2,000 computer using a paper check. At which step does $2,000 get recorded in M1?
A. When Ava hands the $2,000 check to the computer merchant. B. Once the Federal Reserve sends the paper check (or an electronic image) to Ava's bank. C. The check is never M1. The $2,000 is M1 both in Ava's bank account and, later, in the merchant's account. It is the deposit balance that is counted. D. Once the $2,000 is credited to the merchant bank's reserve account and is debited from Ava's bank account.