Economies of scale arise from:
A. decreasing returns to scale.
B. increasing returns to scale.
C. constant returns to scale.
D. constant marginal returns to scale.
Answer: B
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The maximum amount of increase in the money supply that can be caused by an increase in excess reserves is equal to the
A) deposit multiplier ´ the required reserve ratio. B) loan multiplier ´ the change in excess reserves. C) deposit multiplier ÷ the change in excess reserves. D) deposit multiplier ´ the change in excess reserves.
Suppose, for whatever reason, the trade deficit of the United States with Europe is projected to fall and that before this happens the exchange rate between the euro and the dollar is .75 euros/dollar. The resulting exchange rate would likely
A. fall to (perhaps) .6 euros/dollar. B. rise to (perhaps) .9 euros/dollar. C. cause the exchange rate to have to be expressed in dollars per euro (because the other way would no longer make sense). D. remain unchanged.
A direct cost of public debt is:
A. the interest the government has to pay to the people it has borrowed from. B. it allows the government to be flexible when something unexpected happens. C. it can pay for investments that will lead to economic growth in the long run. D. All of these are costs to holding public debt.