If a commercial bank is short of reserves, it can obtain funds by
a. recalling loans.
b. borrowing from another commercial bank.
c. borrowing from its Federal Reserve Bank.
d. all of these methods.
d. all of these methods.
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A change in financial technology that reduces the need to hold cash balances ________ the demand for money and ________ the equilibrium nominal interest rate
A) increases; raises B) decreases; lowers C) increases; lowers D) decreases; raises E) decreases; does not change
Refer to Figure 7-2. At the market equilibrium, the deadweight loss is equal to
A) $0. B) $500,000. C) $1,000,000. D) $2,000,000.
Suppose the required reserve ratio is 20 percent. If banks are conservative and choose not to loan all of their excess reserves, the real-world deposit multiplier is
A) less than 5. B) equal to 5. C) greater than 5. D) equal to 20.
We would not expect a Japanese financial asset and a U.S. financial asset with identical risk, liquidity, and information characteristics to have different expected returns because
A) the U.S. and Japanese governments have pledged themselves to avoid this outcome. B) traders would buy the asset with the higher expected yield and sell the asset with the lower expected yield until the yields were brought into equality. C) traders would sell the asset with the higher expected yield and buy the asset with the lower expected yield until the yields were brought into equality. D) the exchange rate between the dollar and the yen would adjust automatically to eliminate any difference in yields.