What is the divine coincidence? When and why does it not hold true?
What will be an ideal response?
The divine coincidence is the ability to achieve both inflation stability and output stability at the same time. The divine coincidence fails when there is a temporary supply shock. When the short-run aggregate supply curve shifts along the aggregate demand curve, both output and inflation gaps result. The only policy response is to shift the aggregate demand curve. Because the SRAS curve has a positive slope, shifting of the AD curve must enlarge one gap in order to reduce the other.
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The short-run demand curve for labor for a firm in any type of market for its output coincides with
a. the upward sloping portion of the marginal revenue product curve. b. the downward sloping portion of the marginal revenue product curve. c. the downward sloping portion of the marginal product curve. d. the marginal labor cost curve.
Which of the following is the relationship among excess reserves, required reserves, and total reserves?
a. total reserves = required reserves - excess reserves b. excess reserves = total reserves/required reserves c. total reserves = excess reserves + required reserves d. total reserves = excess reserves - required reserves e. excess reserves = required reserves - total reserves
The principal of a loan is the:
A. set of rules and conditions borrowers agree to when taking out a loan. B. original amount of the loan. C. set of rules and conditions savers agree to when agreeing to let someone borrow their money. D. original amount that people want to borrow.
Jeff Kaufman decides to bank with Paris First National Bank (PFN). He opens a checking account by depositing $1,000. According to the PFN balance sheet, after this initial $1,000 checkable deposit, there are $1,000 in:
A. reserves and $1,000 in checkable deposits. B. liabilities and $2,000 in checkable deposits. C. checkable deposits and $0 in assets. D. assets and $0 in liabilities.