What are the similarities between perfect competition and monopolistic competition?
What will be an ideal response?
In both market structures, there are many buyers and sellers and there are no barriers to entry.
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When the Fed buys a U.S. bond in the open market
A) its action contracts total reserves and the money supply. B) total reserves increase by the amount of the purchase but the money supply stays the same. C) its action expands total reserves and the money supply. D) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
Which of the following will happen if consumption in an economy falls?
A) Firms' revenue fall. B) Labor supply falls. C) Mortgage defaults fall. D) Asset prices rise.
If people never withdraw cash from banks and there are no required reserves, how much money can the banking system potentially create for a given amount of new deposits?
A. None. B. The same amount as the new deposits. C. An infinite amount of money. D. The amount of new deposits multiplied by the reserve ratio.
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1. B. P2 and Y1. C. P2 and Y3. D. P1 and Y2.