Suppose you found $1,000 hidden in your mattress and deposited it in a demand deposit account at your bank. If the reserve requirement was 20 percent, the deposit would directly create ____ in excess reserves and ultimately lead to a ____ total increase in the money supply, if all banks in the system lend out 100 percent of their excess reserves
a. $800; $4,000
b. $800; $5,000
c. $1,000; $4,000
d. $1,000; $5,000
b
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Suppose the U.S. government has an annual budget of about $4 trillion. Does the U.S. government face the problem of scarcity?
A. No, a government with $4 trillion in spending faces no real constraints. B. No, scarcity does not apply to governments. C. Yes, resources are limited even for the U.S. government. D. Yes, although the U.S. government can easily obtain more resources. E. Uncertain, economic theory has no answer to this question.
If the expected real interest rate in an economy is 6% and the expected inflation rate is 4%, then the nominal interest rate in the economy is:
A) 6%. B) 14%. C) 4%. D) 10%.
Which of the following is not a correct characterization of the U.S. business cycle?
A) Employment is procyclical. B) Consumption is procyclical. C) Real wages are procyclical. D) Prices are procyclical.
What happens in a perfectly competitive industry when economic profit is greater than zero?
A) Existing firms may get larger. B) New firms may enter the industry. C) Firms may move along their LRAC curves to new outputs. D) There may be pressure on prices to fall. E) All of the above may occur.