A commercial bank’s ability to create money depends on which of the following?
A. The existence of a central bank
B. A fractional reserve banking system
C. Gold or silver reserves backing up the currency
D. A large national debt
E. The existence of both checking accounts and savings accounts
Ans: B. A fractional reserve banking system
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If 1-year interest rates for the next five years are expected to be 4, 2, 5, 4, and 5 percent, and the 5-year term premium is 1 percent, than the 5-year bond rate will be
A) 2 percent. B) 3 percent. C) 4 percent. D) 5 percent.
Comparative advantage implies choosing the activity that
A) has a high opportunity cost. B) is inside the production possibilities frontier. C) has the lowest opportunity cost. D) does not demand any specialization.
PPP-adjustment:
A. gives us a more realistic sense of differences in living standards around the world. B. allows us to see that poorer countries are not quite so poor as suggested by their nominal GDP per capita. C. gives us a realistic sense of how the living standards of the world's poorest citizens translate into dollar terms. D. All of these statements are true.
On the basic supply-demand graph, the point at which the demand curve and the supply curve intersect is located at
A. market price and market quantity. B. equilibrium price and equilibrium quantity. C. equilibrium demand and equilibrium supply. D. quantity demanded and quantity supplied.