The required reserve ratio for Bank A, Bank B, and Bank C is 10 percent. Bank A receives a deposit of $50,000 and uses all the resulting excess reserves to make a loan that is deposited into an account at Bank B. Bank B then uses all the resulting excess reserves to make a loan that is deposited into Bank C. How much money has been created as a result of this chain of transactions?
a. $9,500
b. $85,500
c. $45,000
d. $40,500
b. $85,500
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What do the classical growth theory and the new growth theory predict for global growth amongst different nations? Comment on the accuracy of the predictions
What will be an ideal response?
If a demand curve for a good is perfectly inelastic, then the seller could
A. increase price and not change the number of units purchased. B. ignore the effects of costs on its profits. C. rely on buyers to look for other products if it increases price. D. sell more units by advertising.
An example of a good or service that would not count in the U.S. GDP would be:
A. a car made by Toyota in Tennessee. B. a car made by Ford in Michigan. C. sneakers made by Nike in Indonesia. D. sneakers made by New Balance in Ohio.
When the economy is at full employment and inflation is present, the government could create a surplus budget by cutting its own spending and raising taxes. The Fed would be expected to:
A. reduce the required reserve ratio, increase the discount rate, and buy securities on the open market. B. reduce the required reserve ratio, reduce the discount rate, and sell securities on the open market. C. reduce the required reserve ratio, reduce the discount rate, and buy securities on the open market. D. increase the required reserve ratio, increase the discount rate, and sell securities on the open market.