Suppose a banking system has $100,000 in deposits, a required reserve ratio of 25 percent, and total bank reserves for the whole system of $25,000. Then the potential increase in deposit creation for the whole system is equal to
A. $25,000.
B. $0.
C. $100,000.
D. $50,000.
Answer: B
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An economic model can be defined as
A. a testable claim that can be evaluated with proper data. B. a representation of a theory or a part of a theory. C. another word for theory. D. a method to distinguish correlation from causation. E. All of these responses are correct.
If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is
A) 8%. B) 4%. C) 3%. D) 2%. E) 1%.
In a two-period model with production, a decrease in the world real interest rate
A) increases the current account surplus and increases real output. B) reduces the current account surplus and increases real output. C) increases the current account surplus and reduces real output. D) reduces the current account surplus and reduces real output.
An increase in the interest rate will stimulate firms' investment spending
a. True b. False Indicate whether the statement is true or false