The benefit of holding money is ________, while the opportunity cost of holding money is ________.
A. the nominal interest rate; the fees charged by banks
B. increased income; lost purchasing power
C. its usefulness in carrying out transactions; the nominal interest rate
D. the nominal interest rate; its usefulness in carrying out transactions
Answer: C
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When a commercial bank lends $1000 to a customer
A) M1 and M2 decline by $1000. B) M1 and M2 rise by $1000. C) M1 rises but M2 does not change. D) there is no change in M1 or M2 until the loan proceeds are spent.
Give some examples of the operation of the principle of comparative advantage.
What will be an ideal response?
When he was chairman of the Fed, Paul Volcker faced an economy with significant stagflation which was a result of oil shocks. Volcker was determined to bring the inflation rate down, which essentially acted like a decrease in the inflation target
In this sense, Volcker's action caused ________ and caused inflation to decrease and ________. A) the AD curve to shift to the left; real GDP to increase. B) the AD curve to shift to the left; real GDP to decrease. C) the AS curve to shift to the right; real GDP to increase. D) the AS curve to shift to the right; real GDP to decrease.
Name three actions the Fed can take to increase the money supply