When the desired reserve ratio is 10 percent, suppose the Fed buys $1,000,000 of government securities from banks. As a result, the banks' excess reserves
A) increase by $900,000.
B) increase by $1,000,000.
C) increase by $10,000.
D) decrease by $10,000.
E) decrease by $1,000,000.
B
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The multiplier can be calculated by dividing
A. one by one minus the marginal propensity to invest. B. one by one minus the marginal propensity to save. C. the change in real GDP by the initial change in spending. D. the initial change in spending by the change in real GDP.
If the growth rates of nominal GDP and real GDP in an economy are 6% and 2% respectively, the inflation rate in the economy must be:
A) 2%. B) 8%. C) 4%. D) 3%.
If the expected value of the U.S. dollar rises, one would expect ________
A) a decrease in the demand for dollars B) an increase in the demand for the dollar C) an increase in U.S. income D) an increase in federal income tax rates
The profit-maximization assumption of economic theory does not fit reality because:
A. all real firms want to maximize long-term profits rather than short-run profits. B. all real firms want to maximize their share of the market. C. real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization. D. real-world firms have a single goal, but this goal has nothing to do with profits.