Briefly explain how banks serve as financial intermediaries and provide an example of how they provide mediums of exchange.
What will be an ideal response?
Student response will vary. A sample response follows. Banks are financial intermediaries that take in deposits from customers who want to save and use that money to provide loans to those who want to borrow. Banks make a profit by charging borrowers a higher interest rate than the interest rate they offer depositors. Banks also provide mediums of exchange by providing products that facilitate transactions. For example, banks offer debit cards that enable depositors to transfer funds directly from their accounts to merchants when they wish to make a purchase, rather than forcing the depositors to visit a bank and withdraw cash for that purpose.
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The textbook defines any business with less than __________ in assets to be "small."
A) $100,000,000 B) $10,000,000 C) $1,000,000 D) $500,000
If a Pigovian tax is levied on producers, the supply curve will shift:
A. straight up, decreasing quantity. B. straight down, decreasing quantity. C. straight up, increasing quantity. D. straight down, increasing quantity.
Which of the following best describes an adverse outcome of short-term government deficits?
a. In the short run, a government that runs a small budget deficit can shift aggregate demand to the right and trigger severe inflation. b. In the short run, a government that runs a very large budget deficit can shift aggregate demand to the left and trigger severe inflation. c. In the short run, a government that runs a very large budget deficit can shift aggregate demand to the right and trigger severe inflation. d. In the short run, a government that runs a small budget deficit can shift aggregate demand to the left and trigger severe inflation.
During periods of high inflation, money becomes:
A. more useful as a medium of exchange. B. less useful as a unit of account. C. more useful as a unit of account. D. more useful as a store of value.