Answer the next question on the basis of the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 30 percent. All figures are in billions.AssetsLiabilities & Net WorthReserves$51 Checkable Deposits$140Loans109 Stock Shares130Securities100 Property10?Refer to the above data. If the commercial banking system actually loans the maximum amount it is able to lend:
A. excess reserves will be $2.6 billion.
B. excess reserves will fall to $1.7 billion.
C. excess reserves will be reduced to zero.
D. reserves and deposits equal to that amount will be gained.
Answer: C
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Perfect competition and monopolistic competition are similar in that firms in both types of market structure will
A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters.
Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?
a. a gradual increase in the value of its currency b. a gradual decrease in the value of its currency c. a "run" on its currency and a sudden appreciation d. a "run" on its currency and a sudden devaluation
Private ownership of a monopoly may benefit society because the monopoly will have an incentive to
a. charge a price that is consistent with that of a benevolent social planner. b. charge a price that prevents some people from buying. c. price its good according to the intersection of marginal cost and average revenue. d. lower its costs to earn a higher profit.
The foreign purchases effect suggests that a decrease in the American price level relative to those in other countries will
A. shift the aggregate demand curve leftward. B. shift the aggregate supply curve leftward. C. decrease American exports and increase American imports. D. increase American exports and decrease American imports.