Explain what is meant by the phrase "a bank's balancing act."
What will be an ideal response?
Banks accept deposits and make loans with the funds they receive from the deposits. Banks profit if the interest rate they charge on their loans exceeds the interest rate they pay on their deposits. Loans are made for a specified length of time and cannot be called in before they are due. However, deposits can be withdrawn at any time by the depositors. Therefore a bank must perform a balancing act: It is risky to lend too much of the deposits and run the risk of mass withdrawals that would create a crisis for the bank. However, it is by making loans that the bank earns a profit.
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In the two-country model of the Monetary Approach, the spot exchange rate is determined by
A) the relative quantities of money supplied and demanded. B) the real money stock in country A vs. country B. C) the nominal incomes in the two countries. D) the ratio of prices in the economies.
What made the recession of 2007-2009 different than any other recession since the Great Depression?
A) the government did not implement a fiscal stimulus B) the Fed failed to reduce interest rates C) it was accompanied by a financial crisis D) the impact was primarily limited to the financial sector
Assuming your local cash price is quoted above the CBOT futures price, an increase in transportation costs in your area would be expected to have what effect on the basis:
A. Widen the basis. B. Strengthen the basis. C. No effect on the basis. D. Not enough information to tell.
In 2009, _________ became the world's largest exporter.
A. Germany. B. China. C. Japan. D. Russia.