When a commercial bank lends $1000 to a customer, and the loan proceeds are spent by the customer, the legal reserves of the banking system
A) decline by $1000.
B) do not change unless the loan proceeds are withdrawn in currency.
C) rise by $1000.
D) rise by more than $1000 because spending increases nominal GDP.
B
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What will be an ideal response?
Differentiate between the current account balance and the capital account balance
Which of the following is NOT true of nontariff barriers to imports?
A. Like tariffs, nontariff barriers result in a net welfare loss in a small country. B. Some nontariff barriers create uncertainty about the conditions under which imports will be permitted. C. Nontariff barriers can limit imports with greater certainty than tariffs. D. Unlike tariffs, nontariff barriers do not increase the price of imported goods in the domestic markets.
In firm X, labor costs are 85 percent of production costs, while in firm Y labor costs are 40 percent of production costs. A 20 percent increase in wages would increase production costs by:
A. 23 percent in firm X and 20 percent in firm Y B. 19 percent in firm X and 15 percent in firm Y C. 15 percent in firm X and 6 percent in firm Y D. 17 percent in firm X and 8 percent in firm Y