How does a central bank influence the lending capacity of the banks?
A central bank can influence the lending capacity of the bank by varying minimum required reserve ratio. Reserve requirements affect the potential of the banking system to create credit which is a part of money supply. Rising of minimum required reserve ratio will reduce the excess reserve with the bank. It will reduce their credit creation capacity therefore lowers the money supply and increases the interest rate. Similarly, lowering the required reserve ratio will increase the interest rates and set off a multiple expansion of the banking system.
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In the short run, a price increase in the goods and services market measured by the CPI will: a. increase the purchasing power of money
b. improve producer profits and, thereby, induce suppliers to expand output. c. increase resource prices, lower profits, and lead to a decline in output. d. reduce the natural rate of unemployment.
One In the News feature reports that General Motors planned to essentially quit making cars and trucks in the United States for nine weeks from mid-May through July 2009 and Omaha Power planned to close one of its nuclear plants permanently. Based on these particular news clips, what is the difference between GM's and Omaha Power's decisions?
A. Omaha Power was trying to get rid of excess inventory, and GM was trying to become more efficient. B. There is no difference between GM's and Omaha Power's decisions; both were trying to get rid of excess inventory. C. GM was trying to maximize profits while Omaha Power was trying to minimize losses. D. GM's decision to idle plants was a short-run shutdown decision. Omaha Power, by contrast, made a long-run decision to exit a specific market.
Inputs to production do NOT include
A. land. B. business know-how. C. labor. D. average product.
The official poverty line in the United States was established by the government in the early 1960s.
Answer the following statement true (T) or false (F)