A good is an inferior good if the consumer buys less of it when
a. his income rises.
b. the price of the good rises.
c. the price of a substitute good falls.
d. his income falls.
a
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A-1 bank initially has no excess reserves. If the desired reserve ratio is 10 percent and a new deposit of $10,000 is made in A-1, then A-1
A) can immediately loan $9,000. B) is required to hold the deposit in its reserves. C) can immediately loan $100,000. D) can immediately loan a multiple of the $10,000. E) can immediately loan $10,000.
Which of the following theories states that people who are highly risk-averse are less likely to engage in high-risk activities?
a. The theory of moral hazard b. The theory of adverse selection c. The propitious selection theory d. The death spiral theory
Refer to Figure 7.2. Curve A must be MPL and Curve B must be APL because:
A. the two curves intersect at the maximum of Curve A.
B. everywhere that Curve A is positively-sloped, Curve B is positively-sloped as well, and everywhere that Curve A is negatively-sloped, Curve B is negatively-sloped as well.
C. when Curve A lies above Curve B, Curve B is rising, and when Curve A lies below Curve B, Curve B is falling.
D. when Curve B lies above Curve A, Curve A is rising, and when Curve B lies below Curve A, Curve A is falling.
David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity. Ricardo’s discovery is called the law of
A. comparative advantage. B. absolute advantage. C. compensating balances. D. increasing returns.