During the early 1930s there were a number of bank failures in the United States. What did this do to the money supply? The New York Federal Reserve Bank advocated open market purchases. Would these purchases have reversed the change in the money supply and helped banks? Explain
Bank failures cause people to lose confidence in the banking system so that deposits fall and banks have less to lend. Further, under these circumstances banks are probably more cautious about lending. Both of these reactions would tend to decrease the money supply. Open market purchases increase bank reserves and so would have at least made the decrease smaller. The increase in reserves would also have provided banks with greater liquidity to meet the demands of customers who wanted to make withdrawals. In short, while the actions of depositors and banks lowered the money supply, the Fed could have increased it by buying bonds.
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A new country has been established on the moon and created a currency called cheesybits. Which of the following represents demand for cheesybits?
A. Luna lives on the moon and wants to travel to visit relatives in Japan. B. Moonbeam Incorporated, the largest company on the moon, sells building products for houses on the moon. C. Moonrock corporation needs new mining equipment that it buys from a manufacturer in Russia. D. Han is visiting the moon and wants to eat at his favorite restaurant, the Moonglow Bar and Grill.
Assuming the existence of economies of scale, if a firm finds that it can reduce its unit cost by decreasing its scale of production, it means that
A) it has too much production capacity relative to its demand. B) it should try to produce less. C) the law of diminishing returns has not taken effect. D) it has too much fixed overhead relative to its variable cost.
Which one of these is not a characteristic of capitalism?
A. Central planning B. Private property C. The price mechanism D. Competition
Friedrich Nietzsche's views on income distribution and fairness can best be described by the statement:
A. An efficiently operating marketplace will generate an equal distribution of income without government intervention. B. Society's goal should be to maximize the welfare of the least well-off, but some inequality is necessary to meet this goal. C. A high level of income inequality is necessary to sustain the arts, beauty, education, and civilization. D. The lesser individuals' duty should be to work for the well-being of the brightest individuals.