The sharp increase in the excess reserves held by the commercial banking system since the second half of 2008 increases the potential for
a. a sharp contraction in the money supply, which is likely to increase the length and severity of the recession.
b. a rapid increase in the money supply, potentially leading to inflation.
c. a gradual increase in the money supply, following the trend of the previous decade.
d. a reduction in the ability of banks to extend additional loans.
B
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The passage of the Smoot-Hawley Tariff in 1930 sparked a trade war that caused net exports to ________ and real GDP to ________
A) decrease; increase B) increase; increase C) decrease; decrease D) increase; decrease
Evidence in support of the efficient markets hypothesis includes
A) the failure of technical analysis to outperform the market. B) the small-firm effect. C) the January effect. D) excessive volatility.
If a revenue-maximizing firm is told that the price elasticity of demand at current prices is equal to one, it should
a. raise prices 1 percent b. lower prices 1 percent c. raise prices until the elasticity becomes very high d. keep the price where it is e. lower prices until the elasticity becomes very high
Suppose Larry's Lariats produces lassos in a factory, and uses nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length, then seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. If Larry were to decrease the production of lassos, which of the following is true regarding the company's costs?
A. The fixed cost of the rope cutting machine would stay the same. B. The variable costs of rope would drop to zero. C. The fixed cost of the employee's wages would stay the same. D. None of these is true.