Describe the mechanism which would take place if the Bank of England decides to increase its money supply by purchasing domestic assets under the gold standard
What will be an ideal response?
The increase in Britain's money supply would push interest rates down and make foreign currency assets more attractive than domestic ones. Holders of pound deposits will attempt to sell them for foreign deposits. To accomplish this, they sell pound deposits to the Bank of England for gold and then use this gold to purchase foreign deposits. England loses foreign reserves since it is selling gold and foreign countries are gaining reserves. Equilibrium is re-established after Britain's money supply has fallen enough to force the British interest rate up until it is equally as attractive as the interest rate on foreign currency.
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The process by which simultaneous withdrawals by a particular bank's depositors results in the bank closing is known as a
A) contagion. B) bank run. C) financial crisis. D) bank panic.
Which of the following is LEAST likely to be an outcome of a cartel as compared to the situation before the cartel was formed?
A. Cartel members make fewer profits. B. Cartel members do not compete with each other in pricing decisions. C. Cartel members reduce production. D. Cartel members charge higher prices.
We call a market where there is only one producer of a good or service a monopoly.
Answer the following statement true (T) or false (F)
Total cost is calculated as
A. the sum of total fixed cost and total variable cost. B. the sum of average fixed cost and average variable cost. C. the product of average total cost and price. D. the sum of all the firm's explicit costs.