How would an increase in the required reserve ratio affect banks' ability to create money?
a. Banks will be able to create more money because of the decrease in excess reserves.
b. Banks will be able to create more money because of the increase in the demand deposit multiplier.
c. It will have no effect on banks' ability to create money.
d. It will reduce banks' ability to create money by forcing them to hold more reserves.
e. It will reduce the banks' ability to create money by increasing excess reserves.
D
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Asarta Inc. is polluting into a nearby fishing; doing so benefits them $40,000 a year. The fishermen are unhappy as their trout are dying off. Typically, the fishermen can catch trout and sell it to a local market where they can earn about $8,000 a year. Currently, the fishermen have the rights to use the stream as they see fit. Which of the following is an optimal solution according to the Coase Theorem?
A. Asarta Inc. could pay the fishermen $8,500 and keep polluting B. There is no optimal solution given the current property rights C. The fishermen could pay Asarta Inc. $4,000 to stop them from polluting D. Asarta Inc. could pay the fishermen $7,000 and keep polluting
Why is normal profit an opportunity cost?
What will be an ideal response?
A profit-maximizing firm invests up to the point at which the marginal rate of return on capital is greatest
a. True b. False
Supply-side economics is based on the theory that:
A. budget deficits will stimulate demand, output, and employment. B. budget deficits will lead to higher interest rates, which will weaken their expansionary impact. C. higher tax rates will increase tax revenues. D. increases in aggregate supply lower the price level.