Suppose the required reserve ratio is 0.20. Total bank deposits are $200 million and the bank holds $50 million in reserves. How much more money could the bank create if it does not hold excess reserves?
A. $25 million
B. $50 million
C. $5 million
D. $30 million
Answer: B
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
Using this consumption function, autonomous consumption is
A) $0. B) between $1 and $2 trillion. C) more than $2 trillion and less that $5 trillion. D) more than $5 trillion and less than $8 trillion. E) more than $8 trillion.
An example of a poverty trap is:
A. the malnourished not having enough energy to develop their economy. B. the uneducated not knowing how to further develop their economy. C. those who do not have basic immunizations not being healthy enough to develop their economy. D. All of these are examples of poverty traps.
When wages are fixed by contract, inflation reduces
a. nominal wages; this likely makes labor markets more flexible. b. nominal wages; this likely makes labor markets less flexible. c. real wages; this likely makes labor markets more flexible. d. real wages; this likely makes labor markets less flexible.