If the required reserve ratio is 100 percent, could the Federal Reserve still change the money supply with open market operations? Explain whether they could or could not
What will be an ideal response?
The Federal Reserve could still change the money supply, because the initial purchase or sale of government securities would change checking account deposits. For instance, if the Fed purchases a $1,000 government bond from you and you deposit the funds in the bank, then checking account deposits and the money supply would go up $1,000. The simple deposit multiplier with a 100 percent required reserve ratio would equal one, not zero, so an increase in reserves still increases checking account deposits.
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The AD curve is the relationship between
A) aggregate planned expenditure and the price level. B) aggregate planned expenditure and real GDP when the price level is fixed. C) the quantity of real GDP demanded and the unemployment rate. D) aggregate planned expenditure and the quantity of real GDP demanded. E) the quantity of real GDP demanded and the quantity of real GDP supplied. The above figure shows a nation's consumption function.
Tom and Eric went to trade school at the same time. Each graduated with an associate's degree. They have received similar performance evaluations. Eric's employer is not a good business manager, and the sales manager lost a major deal. Because of the decrease in profits, the employees did not receive raises last year. Tom's employer is a savvy business manager and the sales manager is experienced
and works hard. If Tom has higher earnings than Eric, the difference is most likely a function of a. chance. b. differences in human capital. c. differences in signaling. d. discrimination.
Which of the following will cause the investment demand curve to shift to the right?
A. An increase in disposable income. B. A decrease in the cost of labor. C. A decrease in interest rates. D. An improvement in technology.
Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al
A) will achieve the socially optimal quantity of trash. B) will result in zero trash being dumped in the park. C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. D) is unfair.