Use the market for central bank money to answer this question. Graphically illustrate and explain what effect an increase in the reserve deposit ratio (?) will have on this market and on the equilibrium interest rate
What will be an ideal response?
An increase in the parameter ? will cause an increase in banks' demand for reserves and, therefore, an increase in the demand for central bank money. This will cause an excess demand for central bank money at the initial interest rate. In this case, the interest rate will rise to restore equilibrium.
You might also like to view...
Changes in aggregate demand
A) could be caused by changes in the spending decisions of the households, businesses, the government, and foreigners. B) are very uncommon. C) are unlikely to change quickly in response to economic events. D) are primarily based on changes in firms' abilities to produce products. E) are not affected by changes in government policies.
Which of the following barriers to entry can best explain the continued success of a product that has been shown to be, in some way, harmful to the health of consumers?
A) Patent. B) Consumer lock-in. C) Brand loyalty. D) Ownership of an essential resource.
Probit coefficients are typically estimated using
A) the OLS method B) the method of maximum likelihood C) non-linear least squares (NLLS) D) by transforming the estimates from the linear probability model
The expenditure approach to measuring GDP involves adding up the purchases of final goods and services by market participants
a. True b. False Indicate whether the statement is true or false