Will an open market sale by the Federal Reserve increase banks' willingness to make loans? Explain.
What will be an ideal response?
No, just the opposite. If the Fed sells securities to banks, they are replacing reserves, which did not earn revenue for the banks, with securities, which do earn revenue. As a result, bank revenue will increase even if the banks do nothing. Also, the reserves of the banking system are now lower so collectively, banks have less willingness and ability to make loans.
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In 2013, the reference base period for the CPI for the nation of Webot, a typical consumer spent $30 on potatoes and $150 on steak
If the price of steak is $15 and the price of potatoes is $1 then there are ________ units of steak and ________ units of potatoes in the CPI market basket. A) 10; 30 B) 150; 30 C) 5; 30 D) 30; 150 E) None of the above answers is correct.
Which of the following markets is an example of an oligopoly?
A) The market for premium apparels B) The market for books C) The market for video games D) The market for wheat
A cut in the payroll tax will tend to cause, other things the same, ________
A) a change in aggregate demand, with no effect on supply B) a change in both aggregate demand and supply C) a change in aggregate supply, with no effect on demand D) no change in either aggregate demand or supply
The idea that higher prices reduce the purchasing power of financial assets and lead to less consumption is known as the:
a. real balances effect. b. interest rate effect. c. foreign purchases effect. d. income effect. e. aggregate demand effect.