Suppose the reserve ratio is 25% and banks do not hold excess reserves. When the Fed sells $40 million of bonds to the public,
A) bank reserves increase by $40 million and money supply could increase by a maximum of $40 million.
B) bank reserves increase by $40 million and money supply could increase by a maximum of $160 million.
C) bank reserves decrease by $40 million and money supply could decrease by a maximum of $40 million.
D) bank reserves decrease by $40 million and money supply could decrease by a maximum of $160 million.
Ans: D) bank reserves decrease by $40 million and money supply could decrease by a maximum of $160 million.
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John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. To make the best decision, John should compare:
A. the expected value of his earnings if he doesn't expand with the expected value of his earnings if he does expand. B. the difference in expected earnings if he does or does not expand to the cost of expansion. C. the expected value of his earnings if he expands to the cost of expansion. D. None of these statements is true.
High-wage workers are
a. more likely than low-wage workers to supply more labor when the wage rate rises. b. about as likely as low-wage workers to supply more labor when the wage rate rises. c. less likely than low-wage workers to supply more labor when the wage rate rises. d. The available evidence does not indicate how high-wage workers and low-wage workers differ in responding to changes in the wage rate.
If the interest rate is positive, the present value of $10 to be received in the future is
A. less than $10. B. equal to $10. C. more than $10. D. Any of the above is possible, depending on the interest rate and when the payment is to be received.
Changing the ownership of the ocean from common property to private property would
A) ensure that this resource would be allocated in a more efficient manner. B) ensure that this resource would be allocated in a less efficient manner than under common property rights. C) not be economically desirable. D) result in no appreciable change in efficiency of utilization of this resource.