The reserve ratio is 20 percent. The Fed buys $1 million in government securities from a bond dealer by transmitting the funds to the dealer's deposit account at Bank A Bank A loans the maximum amount possible to a construction company, which buys materials from a lumber yard. The lumberyard deposits the construction company's check in Bank B. What is the maximum loan Bank A can now make and the maximum loan Bank B can now make?
A) Bank A: 0; Bank B: $640,000
B) Bank A: 0; Bank B: $800,000
C) Bank A: $800,000; Bank B: $640,000
D) Bank A: $800,000; Bank B: 0
A) Bank A: 0; Bank B: $640,000
Since Bank A already loaned the maximum amount (800,000, since the reserve ratio is 20% and 20% of 1 million is 200,000), they cannot make a loan. Bank B now has the 800,000 but needs to keep 20% (or 160,000, which is 20% of 800,000) and 800,000-160,000= $640,000.
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One of the essential functions that a bank performs is
A) transferring money from savers to lenders. B) owning assets like real estate. C) purchasing government bonds. D) creating deposits by lending required reserves.
As other firms enter a monopoly's market, the demand curve a monopoly faces
A) is unaffected. B) becomes more inelastic. C) becomes more elastic. D) may become more or less elastic, depending on its Lerner Index.
Let P be the output price for a particular good. Why is the value P*MPL greater than MRPL for a monopolist?
A) The monopolist is not as technically efficient as firms operating under perfect competition. B) The monopolist hires less labor, so MPL is higher under a monopoly than under perfect competition. C) The monopolist sets a price that is higher than MR. D) A and C are correct. E) B and C are correct.
Which of the following observations concerning labor cost patterns over the last century is true?
a. Average real wages started rising after 1973. b. Hourly compensation rates have fallen dramatically. c. Compensation growth slowed markedly. d. Average hours worked per week have increased by almost 50 percent.