The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that
A. banks hold reserves equal to their net worth.
B. banks generally are required to hold surplus funds on deposit with other banks.
C. most banks maintain a relatively large stock of reserves.
D. banks are required to hold only a fraction of their deposit liabilities as reserves.
Answer: D
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Which of the following is an example of a normative - as opposed to a positive - statement?
a. The discount rate is the interest rate the Federal Reserve charges banks to borrow funds. b. The US income tax rate increases with the amount of income earned. c. The government should increase the tax on gasoline. d. The US unemployment rate increased to 10 percent in 2009.
Firms in Colorado dump waste into the Colorado River and as a result, people in California and Mexico cannot use the water. What type of market failure is most likely involved?
A. Public goods. B. Externalities. C. Market power. D. Inequity.
Marginal utility is
A. The change in total utility obtained by consuming one additional unit of a good or service. B. Always negative or zero. C. The diminishing nature of total utility. D. The sum of the total utility of consuming a certain amount of a good.
What are the five major forces that can lead to financial crises? Explain each of these forces in depth.
What will be an ideal response?