Traveler's checks have no reserve requirements and are included in M1. When people travel during the summer and convert some of their checking account deposits into traveler's checks, explain what happens to the monetary base.
What will be an ideal response?
The monetary base is the sum of reserves and currency in the hands of the public. So to answer the question we need to consider what happens to public currency and what happens to reserves. Since traveler's checks do not alter public currency nor do they deplete the banking system of reserves, the conversion of checkable deposits to traveler's checks does not alter the monetary base.
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Refer to Labor Demand and Labor Supply. What does area B represent?
The following questions refer to the accompanying diagram, which shows an industry's labor demand and labor supply. Labor and capital are the only factors used by the industry. The industry hires L units of labor at a wage of PL.
a. The industry's total revenue.
b. The rent earned by the industry's laborers.
c. The total wages paid to the industry's laborers.
d. The rent earned by the industry's capital.
When a game is played repeatedly
A) only customers learn. B) customers and firms are both able to learn. C) firms end up colluding. D) a prisoner's dilemma will be the equilibrium.
A liquidity trap can occur whenever there is a sharp reduction in the demand for loanable funds in an economy
a. True b. False Indicate whether the statement is true or false
Government-operated firms with monopoly power
a. will necessarily meet the criteria of economic efficiency, as long as price equals average total cost. b. will always be more efficient than private firms because they do not have to make a profit. c. are likely to be inefficient since some of the monopoly power is likely to serve the interests of the governmental managers and employees. d. are highly responsive to changes in the preferences of individual consumers since consumers are also voters.