Fractional reserve banking can be thought of as a bank
A. holding deposits equal to its net worth.
B. withholding a portion of its total deposits that are not loaned out.
C. loaning out all of its reserves.
D. paying a fraction of its profit to depositors.
Answer: B
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
The "invisible hand" described by Adam Smith refers to the
a. allocative role of markets and market forces b. importance of government intervention and central planning c. actions of successful entrepreneurs in directing the economy d. role of monopolized industries in leading the nation e. value of religious belief in creating an ideal economy
Economics is the study of how:
a. humans make decisions in the face of scarcity. b. resources are used to meet human needs. c. humans make decisions when there is an abundance of goods. d. human needs translate to business transactions.
Opportunity cost is the
a. cost incurred when one fails to take advantage of an opportunity. b. cost incurred in order to increase the availability of attractive opportunities. c. cost of the best option forgone as a result of choosing an alternative. d. drudgery of the undesirable aspects of an option.