Assuming initially that the required reserve ratio = 10%, the currency-deposit ratio = 40%, and the excess reserve ratio = 0, an increase in the required reserve ratio to 15% causes the M1 money multiplier to ________, everything else held constant
A) increase from 2.55 to 2.8
B) decrease from 2.8 to 2.55
C) increase from 1.82 to 2
D) decrease from 2 to 1.82
B
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What would lead an economist to conclude that Theory A is superior to Theory B?
A) Theory A predicts real-world events better than does Theory B. B) The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B. C) Theory A explains how people think, whereas Theory B only explains what they do. D) Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.
Which of the following is true?
a. If the Fed wants to increase the money supply, it should increase the interest rate it pays banks on their excess reserves. b. When the Fed reduces the interest rate paid on excess reserves, it increases the incentive of commercial banks to hold excess reserves. c. If the Fed wants to reduce the future growth rate of the money supply, it could do so by increasing the interest rate it pays banks on excess reserves. d. When the Fed increases the interest rate it pays on excess reserves, this encourages banks to extend more loans and thereby increase the money supply.
The above table shows marginal costs and marginal benefits of clean air in a particular industrial area. In the table, when the quantity of clean air is at 75 percent
A. the marginal benefit of clean air exceeds the marginal cost. B. the quantity of polluted air is 75 percent. C. the quantity of clean air is optimal. D. the marginal benefit of clean air is less than the marginal cost.
In the short run, monopolistically competitive firms:
A) can earn an economic profit, minimize a loss, earn a normal profit, or shut down. B) can only earn a normal profit. C) can only earn an economic profit. D) must shutdown if price is less than average total cost.