The distinction between M1 and M2 is based on
A. portability—the ease with which an asset can be moved.
B. divisibility—the ease with which an asset can be used to make smaller payments.
C. liquidity—the ease with which an asset can be converted into cash.
D. storability—how long an asset will retain its value.
Answer: C
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If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:
A. accounting profits must be negative. B. economic profits must be zero. C. other firms will enter the market. D. firms will exit the market.
The total amount of money the banking system can create with an initial deposit (ID) of $10,000 and a legal reserve ratio (LRR) of 25 percent is
a. $30,000 b. $2,500 c. $7,500 d. $10,000 e. $40,000
Suppose that for Jim the marginal benefit (MB) of producing is $60 and that the marginal cost (MC) of producing is $10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is $10. Is Jim currently maximizing utility in terms of producing and stealing? If not, should he produce more and steal less, or produce less and steal more to move toward utility maximization?
A. Yes, Jim is maximizing utility. B. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Jim should produce more and steal less. C. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should produce more and steal less. D. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should steal more and produce less.
Commodity products are
a. pasteurized b. bland c. perceived by consumers to be identical d. made by one manufacturer e. made by hand