Trace the effects on the money supply when the Fed decreases the discount rate
The discount rate represents the cost of bank borrowing from the Fed. When the cost of bank borrowing decreases, banks will increase the amount of borrowing which will create additional reserves. The additional reserves mean banks can make more loans. These new loans end up as deposits by people which increases the amount of money in the economy (through the multiplier effect).
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Consider the market for high-end wine. Statistics show that wealthier families spend a greater proportion of their income on high-end wine than do poorer families. If households' incomes rise substantially during an economic recovery, then we can expect
a. an increased demand for high-end wine. b. an increased supply of high-end wine. c. a lower price for high-end wine. d. the demand curve for high-end wine to shift to the left.
Joseph has the utility function U(F,H) = 10F2H, where F is the quantity of food he consumes per year and H is the quantity of housing per week. Suppose the price of food is $10 and the price of housing is $5, while Joseph has an income of $150/week
a. Calculate Joseph's MRS as a function of the quantities F and H. b. Write out Joseph's constrained optimization problem with the information provide d. c. Using the substitution method, solve for Joseph's optimal consumption bundle of food and housing. d. Show that at the optimum, Joseph consumes the bundle along the budget constraint where MRS = MRT.
Economists study perfect competition
A. because many markets are perfectly competitive. B. for its descriptive realism. C. to establish a benchmark by which to measure the performance of the economy. D. All of the responses are correct.
Lindahl prices
A. result in efficient levels of public goods provision. B. require honest revelation of preferences. C. result in different prices for the same amount of output. D. cause all of these. E. none of these answer options are correct.