Central Banks
What will be an ideal response?
1st they regulate and oversee the nation's commoercial banks by making sure that banks have enough money in reserve to avoid bank runs
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How is a budget line similar to a production possibilities frontier? How do they differ?
What will be an ideal response?
Suppose banks incur heavy losses and become more cautious, increasing their demand for reserve. Make use of a graph of the loanable funds market to show how the Fed can use open market operations to maintain the same federal funds rate
What will be an ideal response?
Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm
A) is more elastic than the residual demand curve without product differentiation. B) is less elastic than the residual demand curve without product differentiation. C) is horizontal. D) shifts to the left.
Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:
A. few substitutes for electricity exist. B. electricity is sold in a monopoly market. C. electricity is a luxury good. D. the fraction of income spent on electricity is large.