How Money is Created?
Why do loans create more money?
Because loans are paid back. If a business owner borrows $100,000 to buy equipment, the business owner must believe that buying equipment will enable them to make at least $100,001 dollars. Thus, the loans allow individuals and businesses to create more value by producing goods and services. Just like spending, lending also has a multiplier, which is 1/reserve ratio Often the lending multiplier can be hard to predict or inconsistent because of personal choices by individuals and businesses.
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Equilibrium is the point where total spending equals total output, or GDP
a. True b. False Indicate whether the statement is true or false
If the CPI in 2015 was 104.5 and the CPI in 2016 was 110.5, then the rate of inflation between 2015 and 2016 was
A. 5.4%. B. 5.7%. C. 6.5%. D. 7.0%.
The expected damage to innocent third parties per unit of the good produced is shown as the "external cost" in Figure 27.1. An unregulated competitive market for the product produces a quantity of Q* units, which sell for a price of P* per unit. If the expected cost to producers of this product due to unreasonable jury awards in frivolous lawsuits were greater than the external cost per unit produced, the quantity of the good produced by this competitive industry would be 
A. less than the socially optimal quantity. B. greater than the socially optimal quantity but less than Q* units. C. equal to the socially optimal quantity. D. greater than Q* units.
The table above shows the production possibilities frontier for the nation of Isolanda
a) Find the marginal cost of a pound of fish using the above PPF. b) How does the marginal cost of a pound of fish change as more fish are caught?