Suppose the required reserve ratio is 8% and that banks hold no excess reserves and the public does not change its currency holdings. If the Fed sells $5 million worth of securities, what happens to the amount of deposits in the banking system?
What will be an ideal response?
The simple deposit multiplier is 1/0.08 = 12.5. The amount of deposits changes by $5 million × 12.5 = -$62.5 million.
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A) long-run aggregate demand rises faster than short-run aggregate supply. B) aggregate demand falls more rapidly than aggregate supply. C) increases in aggregate supply outstrip increases in aggregate demand. D) increases in aggregate demand are not matched by increases in aggregate supply.
The branch of economics which studies the behavior of entire economies is called
A) public economics. B) macroeconomics. C) microeconomics. D) normative economics.
Smart cards will not much affect the demand for money if
A) the money supply is defined to include smart card balances. B) the money supply is defined to exclude smart card balances. C) the balance of the smart card is not considered to be electronic money. D) the reserves of the card issuing institution fall when the smart card is "loaded" with funds from an account the customer already has at that institution.
Comparative advantage identifies the good for which the producer’s absolute advantage is relatively larger, or where the producer’s absolute _____________ disadvantage is relatively smaller.
a. competitive b. profit c. productivity d. trade