Which of the following statements best describes the study of economics? Economics studies how
A) to organize production so that scarcity does not occur.
B) firms make profits.
C) we make choices in the face of scarcity.
D) to create incentives so that scarcity does not exist.
E) businesses reach decisions.
C
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In explaining the evolution of money
A) government regulation is the most important factor. B) commodity money, because it is valued more highly, tends to drive out paper money. C) new forms of money evolve to lower transaction costs. D) paper money is always backed by gold and therefore more desirable than checks.
Fractional reserve banking refers to a system in which the depository institution
A) holds reserves equal to its deposits. B) holds reserves greater than its deposits. C) holds reserves less than its deposits. D) holds zero reserves.
If the Fed wanted to use all of its policy variables to increase the supply of money, which of following would it not do? a. Increase its open market purchases of government securities. b. Increase the required reserve ratio
c. Increase the interest rate it pays banks on bank reserves. d. It would not do b. or c.
In the above figure, the slope at point b
A) lies between 1/3 and 1. B) equals 1. C) lies between 1 and 2. D) exceeds 2.