Bankers have a reputation for conservatism in politics, dress, and business affairs. Is there an economic rationale for this conservatism? Explain.
What will be an ideal response?
There is an economic rationale for this conservatism. Checking deposits are pure fiat money. These deposits are backed by nothing more than a particular bank’s promise to convert them into currency on demand. If people lose trust in a bank, then it will lead to the danger of a run. The danger of a run on the bank has induced bankers to keep prudent norms and to lend out money carefully. They achieved the prudence through two principal ways. First, they maintained a sufficiently generous level of reserves to minimize their vulnerability to runs. Second, they were cautious in making loans and investments because any large losses on their loans would undermine their depositors’ confidence.
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If the price level rises from 100 to 110 then the inflation rate is
A) 100 percent. B) 1.0 percent. C) 10.0 percent. D) 110 percent. E) None of the above answers is correct.
Refer to Figure 10.1. The dominant strategy for ________ is to not contribute
A) Daisy B) Bo C) Luke D) all of the above
When a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and domestic consumers of the good are worse off
a. True b. False Indicate whether the statement is true or false
Which of the following is NOT an example of monetary policy? a. The Federal Open Market Committee decides to sell bonds
b. The Federal Open Market Committee decides to buy bonds. c. The Federal Reserve reduces the reserve requirements. d. The Federal Reserve facilitates bank transactions by clearing checks.