If a bond dealer sells a government bond to the Fed for $100,000, and the reserve ratio is 10 percent, then the bank that receives a $100,000 deposit from the dealer can expand its loans by ________, and the money supply can increase by as much as ________.
A. $90,000; $900,000
B. $80,000; $800,000
C. $90,000; $1,000,000
D. $10,000; $100,000
Answer: C
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Use the following information to answer the next question. Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. What is the economic profit generated by Extreme Gaming in the first year?
A. $160,000 B. $280,000 C. $220,000 D. $155,000
In October of 2014, the nominal interest rate earned on money market accounts was around 0.20 percent. This interest rate is a measure of which of the following?
A) the opportunity cost of holding money B) the inflation rate C) the demand for money D) the real interest rate
Briefly describe the factors that contributed to the U.S. Current Account deficits of the 1990s
What will be an ideal response?
Along a downward-sloping straight-line demand curve,
A. demand is perfectly elastic when price is zero. B. demand is unit elastic at all prices. C. demand is very inelastic at high prices but becomes more elastic as price decreases. D. demand is very elastic at high prices but becomes less elastic as price decreases.