Assume we have a simplified banking system in balance-sheet equilibrium. Also assume that all banks are subject to a uniform 10 percent reserve requirement and demand deposits are the only form of money. A commercial bank receiving a new demand deposit of $100 would be able to extend new loans in the amount of
A. $10.
B. $90.
C. $100.
D. $1,000.
$90
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How does the liquidity approach to measuring the money supply differ from the transaction approach?
What will be an ideal response?
If the price of a substitute increases, which of the following is most likely to happen in the market for the product under consideration in the short run?
A) Supply will increase. B) Firms will leave the market. C) Firms will devote more variable inputs in the production of this good. D) Firms will devote less variable inputs in the production of this good.
If a perfectly competitive industry is monopolized, consumer surplus
a. can be expected to decrease b. will usually remain constant c. can be expected to increase d. drops from a high value to zero e. increases from zero to a high value
A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will
a. raise the price, reduce the quantity, decrease total revenues, and decrease crime. b. lower the price, increase the quantity, increase total revenues, and increase crime. c. raise the price, increase the quantity, decrease total revenues, and increase crime. d. raise the price, reduce the quantity, increase total revenues, and increase crime.