Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?
What will be an ideal response?
Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans.
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Consider two countries-country A and B. Both economies are exactly similar in all aspects except for one. There are well-defined property rights in country A, while there are no property rights in country B
Given this information, which of the following statements is likely to be true? A) Economy A is likely to grow faster than economy B. B) Economy B is likely to grow faster than economy A. C) Both economies are likely to grow at the same rate. D) None of the countries is likely to experience any growth in GDP.
In a recession, the Fed's monetary policy aims to ________ the real interest rate, ________ aggregate demand, and ________ aggregate supply
A) decrease; increase; increase B) decrease; increase; not change C) increase; not change; increase D) increase; increase; increase E) increase; decrease; not change.
Country A has twice as many workers as Country B. Country A also has twice as much physical capital, twice as much human capital, and access to twice as many natural resources as Country B. Assuming constant-returns to scale, which of the following is higher in Country A?
a. both output per worker and productivity b. output per worker but not productivity c. productivity but not output per worker d. neither productivity nor output per worker
Suppose a U.S. automaker builds and operates a new factory in Italy. Future production from such an investment will
a. increase Italian GDP more than it increases Italian GNP. b. increase Italian GNP more than it increases Italian GDP. c. have no affect on Italian GNP, but will increase Italian GDP. d. have no affect on either Italian GDP or GNP.