Explain why the simple deposit multiplier overstates the true deposit multiplier
What will be an ideal response?
The simple model ignores the role banks and their customers play in the creation process. The bank's customers can decide to hold currency and the bank can decide to hold excess reserves. Both of these will restrict the banking system's ability to create deposits. Thus, the true multiplier is less than the prediction of the simple deposit multiplier.
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For each outcome below, tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve
(a) In the short run, the price level is unchanged and output rises. (b) In the long run, the price level declines and output is unchanged. (c) In the long run, the price level rises and output declines.
Suppose real output falls in the aggregate economy. Which is correct?
A) A real business cycle theorist thinks that there was a negative shock to total factor productivity, and that the government should therefore increase expenditures. B) A New Keynesian thinks that the output gap has fallen, and central bank's interest rate target should rise. C) A real business cycle theorist thinks that total factor productivity has risen, and that the government should do nothing . D) none of the above.
The Laspeyres price index tends to ________ the ideal cost-of-living index
A) be higher than B) be lower than C) be equal to D) zero faster than
In games:
A. there is only one strategy associated with each outcome. B. there are several strategies that can achieve a single goal. C. all strategies followed in one particular game should all be similar in order to be successful. D. if one person's strategy is wildly different from those of others, he will typically come in first or last.