Describe the two things that limit the precision of the Fed's control of the money supply and explain how each limits that control
First, the Fed does not control the amount of currency that households choose to hold relative to deposits. If households decide to hold relatively more currency, banks have fewer reserves and the money supply decreases. Second, the Fed cannot control the amount banks choose to hold as excess reserves. If bankers decide to lend out less of their deposits, the money supply will decrease.
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A cost that arises from the production of a good that is paid by someone who did not participate in the production is called
A) a free rider. B) an externality. C) rent seeking. D) a public failure.
Refer to Scenario 1 . If you start the course in such a way that each exam score is better than your previous average what should happen to your average score? What would happen to your average if it was below your previous exam score? Explain
What will be an ideal response?
What is the role of the Federal Deposit Insurance Corporation?
a. To insure bank deposits b. To act as a lender of last resort c. To establish regulations for commercial banks d. To monitor the actions of commercial banks e. To insure the assets of commercial banks
Our ability to manage Social Security as a "pay-as-you-go" program (in which taxes collected from those currently working are used to make benefits payments to those currently retired) is impaired when the number of retirees per worker increases. The current concern about the stability of Social Security is based primarily on projections that there will many more retirees per worker when the baby boomers begin to retire. Then, if we want to maintain a pay-as-you-go system, we can:
A. raise benefits to compensate for the increase in the number of retirees per worker. B. reduce benefits to compensate for the increase in the number of retirees per worker. C. reduce benefits to compensate for the decrease in the number of retirees per worker. D. maintain current benefit levels with no changes to how Social Security is financed.