The ________ is a rule of thumb that estimates the frequency of an event by the ease with which it is possible to summon examples from memory.
A. availability heuristic
B. adaptive rationality standard
C. Weber-Fechner law
D. representative heuristic
Answer: A
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A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10%. The excess reserves of the bank are
A. $900,000. B. $1 million. C. $100,000. D. $50,000.
If the MPS = 0.2, the multiplier would be
A) 0.5. B) 1. C) 2. D) 5.
Which of the following is true of exchange?
a. Exchange is a zero sum activity; if one party gains, the other must lose an equal amount. b. The exchange value of a good is determined by the cost of the resources required to produce the good. c. The total output that trading partners are able to produce is not influenced by whether they trade with each other. d. Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage.
Imagine that this chart is redrawn to represent the marginal propensity to consume of the economy as a whole. How would the chart differ?
a. The slope would be negative.
b. The scale would be larger.
c. The graph would be renamed “Aggregate Expenditure.”
d. The label on the vertical axis would be renamed “Aggregate Expenditure.”