During the height of the euro-are crisis, deposits at the ECB's deposit facility surged above €800 billion because:
A. euro area commercial banks preferred the safety of deposits at the central bank.
B. euro area commercial banks preferred lending to other commercial banks.
C. euro area commercial banks were compelled to increase deposits by ECB policy changes.
D. the deposit rate increased.
Answer: A
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In building a model the assumption that allows economists to study only the factors being analyzed is the
A) rationality assumption. B) ceteris paribus assumption. C) the self-interest assumption. D) the scarcity assumption.
Suppose a basket of goods that costs $400 in the United States costs only £200 in Britain and the current exchange rate is $1/pound. According to the purchasing power parity theory, the equilibrium exchange rate should be higher than $1/pound. Why?
a. The basket could be purchased in Britain for £200 and sold in the United States for $400, and the $400 could be used to purchase £400 for a £200 profit. b. The basket could be purchased in Britain for £200 and sold in the United States for $200, and the $200 could be used to buy £200, for a £500 profit. c. The basket could be purchased in the United States for $400 and sold in Britain for £400, and the £400 could be used to buy $1,400, for a £1,000 profit. d. The basket could be purchased in the United States for $200 and sold in Britain for £400, and the £400 could be used to buy $800, for a $400 profit. e. The basket could be purchased in the United States for $200 and sold in Britain for £400, and the £400 could be used to buy $900, for a £500 profit.
The CARD Act, which tells credit card holders how long it will take to pay off their debt if they only make minimum payments, and how much they need to pay in order to pay off the debt in three years, is an example of:
A. disclosing information in more usable ways. B. choice architecture that nudges people toward better decisions. C. how the presentation of information can affect people's choices. D. All of these statements are true.
Why might an expansion in government spending increase the severity of the coordination problem during a recession?
a. Increases in government spending will not affect the composition of aggregate demand. b. Congress is unlikely to approve increases in government spending during a recession. c. Spending increases will be driven by political considerations and will often flow into areas where resources are already fully employed. d. Government spending can be counted on to flow toward high productivity projects.