Suppose that the actual money multiplier equals the maximum potential money multiplier. If the reserve ratio is 10 percent, in order for the banking system to increase deposits by $2.5 million, the Fed must
A. permit the system to have prolonged reserve deficiencies.
B. buy $250,000 of government securities from the public.
C. sell $250,000 of government securities to the general public.
D. sell $2.5 million of government securities to the general public.
Answer: B
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Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from
A) government agencies. B) equities markets. C) financial intermediaries. D) bond markets.
An individual anticipating rising interest rates is likely to hold more
A) money. B) real assets. C) stock. D) bonds.
If the isoquants are straight lines or L-shaped, then a cost-minimizing firm will
A) not be able to minimize costs. B) find the lowest isocost line touching the relevant isoquant. C) find the highest isocost line touching the relevant isoquant. D) choose not to produce any output.
A group of friends recently started manufacturing specialty T-shirts. The business has grown rapidly, with monthly production up from 50 to 250 in the first 6 months. During this same period, average production cost has been cut in half
The firm's long-run average cost curve over this range of output A) is downward sloping. B) is upward sloping. C) is horizontal. D) may be any of the above.