How do banks partly reconcile the goals of profits and liquidity?
What will be an ideal response?
They can lend temporary excess reserves held at the Federal Reserve Banks to other commercial banks. They lend the excess reserves on an overnight basis in the Federal funds markets. Banks that are short of required reserves borrow from banks that have excess reserves. The interest rate charged on these overnight loans is the Federal funds rate.
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If Ron earns $50,000 in salary and pays income taxes of $15,000, and Harry earns $50,000 from investment dividends taxed at 20 percent, this would be
A. vertical inequity. B. horizontal inequity. C. vertical equity. D. horizontal equity.
Big Pools is large swimming complex. Suppose adults have a demand for entrance into Big Pools that is less than half of the teenagers demand for entrance and there are an equal number of adults and teenagers. If Big Pools practices two-part pricing, to earn greater profit, Big Pools ________ adjust the membership fee to include ________.
A) should not; adults B) should; adults C) should not; teenagers D) should; all consumers
Suppose the consumption equation is represented by the following: C = 250 + .75YD. Now assume government spending increases by 100 for the above economy. Given the above information, we know that equilibrium output will increase by
A) 200. B) 400. C) 800. D) 1000. E) none of the above
Which of the following is likely in response to the policy initiative described in the In the News article titled "U.S. Federal Reserve Cuts Interest Rates to Historic Low"?
A. Home equity and home mortgage loans will dry up. B. Bank lending will increase. C. The unemployment rate will rise. D. The inflation rate will fall in the long run.