Excess reserves make a bank less vulnerable to runs, but bankers do not like to hold excess reserves because holding excess reserves
A. are disliked by depositors.
B. means lower profits for banks.
C. are discouraged by government regulators.
D. All of these responses are correct.
Answer: B
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A regulation that sets the highest price at which it is legal to trade a good is a
A) production quota. B) price floor. C) price support. D) price ceiling. E) subsidy.
In February, 2010 the U.S. M1 money multiplier crashed to 0.786. Each $1 increase in the monetary base resulted in the quantity of money increasing by only $0.79. Where did the remaining $0.21 disappear?
A) Banks held part of the $0.21 as excess reserves. B) Banks loaned out the $0.21. C) Consumers held part of the $0.21 as currency. D) Both A and C are correct.
What is an economic model?
A) It is a simplified version of some aspect of economic life used to analyze an economic issue. B) It is a description of an economic issue that includes all possible related information. C) It is a detailed version of some aspect of economic life used to analyze an economic issue. D) It is a description of an economic issue based on official government information.
An example of a moral hazard would be Andrew leaving the washer, dryer, and dishwasher running at home while he goes to class since he is fully insured and he will not be at risk if a fire occurs
a. True b. False