Consider the following T-account for National City Bank:
Assets Liabilities
Reserves $10,000 Deposits $100,000
Loans $90,000
If the required reserve ratio is lowered to 8 percent, how much can National City loan out?
A) $10,000 B) $8,000 C) $2,000 D) $0
C
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Suppose the Federal Reserve buys bonds from the banking system, the money supply curve ________.
A. will become flatter B. will become steeper C. shift to the left D. shift to the right
If the Herfindahl index is the same in two industries, we can conclude that
a. the number of firms in each industry is the same b. there must not be the same number of firms in the two industries c. the sum of the squared market shares of all firms is the same in the two industries d. there must be an identical distribution of market share among firms in the two industries e. there must be a different distribution of market share among firms in the two industries
Which of the following is not a function of prices in a market system?
a. Prices have the crucial job of balancing supply and demand. b. Prices send signals to buyers and sellers to help them make rational economic decisions. c. Prices coordinate economic activity. d. Prices ensure an equitable distribution of goods and services among consumers.
Suppose Reta is planning for retirement in a two-period world. In the first period Reta is young and earns $1 million, and in the second period Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the
a. substitution effect will induce Reta to consume more when she is young. b. substitution effect will induce Reta to consume less when she is young. c. income effect will induce Reta to consume more when she is young. d. change in interest rates affects the substitution effect but not the income effect.