If the reserve ratio is 5 percent, then $500 of additional reserves can create up to
a. $10,500 of new money.
b. $10,000 of new money.
c. $9,500 of new money.
d. $2,500 of new money.
b
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Suppose the Consumer Price Index (CPI) increased by 5 percent over each of the last 5 years while the GDP price index increased by 12 percent annually. Which of the following reasons could explain this difference?
a. Police unions across the country agreed to substantial salary cuts. b. Import good prices increased relative to domestic good prices. c. The price of used automobiles increased substantially relative to the prices of other goods. d. The price of fighter planes dropped due to increased competition in the aerospace industry. e. The price of investment goods purchased by businesses increased substantially relative to the prices of all other goods.
When firms have the ability to change the market price of a good or service, the market failure involved is:
A.) Market power. B.) Public goods. C.) Externalities. D.) Inequities.
An indifference curve shows the
A. Combinations of goods giving equal utility to a consumer. B. Optimal consumption combinations between two goods. C. Maximum utility that can be achieved for a given consumer budget. D. Maximum utility that can be achieved for different amounts of a good.
Which statement best summarizes the invisible hand theorem?
A. Government policies direct people's selfish desires (tempered by social and economic forces) to the benefit of society. B. Markets direct people's selfish desires (tempered by political and social forces) to the common good. C. Cultural norms direct people's selfish desires (tempered by political and economic forces) to the common good. D. Social, political, and economic forces act against people's selfish desires to promote the common good.