When a bank makes loans with excess reserves, it
A. creates money.
B. destroys money.
C. alters the composition of M1.
D. leaves the money supply unchanged.
Answer: A
You might also like to view...
Which of the following was illustrated by the majority voting decisions witnessed during the Great Depression?
(a) If the U.S. wants to get the most from its resources, the pricing of goods and allocation of investment should be decided by majority voting. (b) In a representative democracy, majority voting will assure that approved projects are productive. (c) There are good reasons to expect that majority voting will sometimes result in the approval of projects that are inefficient. (d) Private firms can force their customers to pay for products they produce, but the government cannot do so.
When the equilibrium price of a product is present
a. neither consumers nor producers will benefit from the exchanges. b. the value of the products to the consumers will exceed the costs of the resources required for their production. c. the consumers will benefit from the exchanges, but the producers will experience losses. d. the producers will profit from the exchanges at the expense of consumers.
A bank seeks a 4% real return on its loans and predicts a 4% annual rate of inflation. It should therefore charge a nominal interest rate of
A) 0%. B) 1%. C) 4%. D) 8%. E) 12%.
The statement "risk requires compensation" implies that people:
A. will only accept risk when they are rewarded for doing so. B. avoid risk at all cost. C. only accept risk when they absolutely have to. D. do not take risk.