Assume that the banking system has $200 billion in reserves. There are no excess reserves in the system. If the reserve requirement is decreased from 10 percent to 8 percent, what will happen to the level of excess reserves in the system?
A. There will be a deficiency of $40 billion in reserves.
B. There will be a deficiency of $20 billion in reserves.
C. There will be $20 billion in excess reserves.
D. There will be $40 billion in excess reserves.
Answer: D
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Refer to Figure 16-11. If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be
A) more than $100 billion. B) less than $100 billion. C) $100 billion. D) There is insufficient information given here to draw a conclusion.
Exchange-rate targeting allows a central bank to ________, thus this will ________ the probability of policy developing a time-inconsistency problem
A) be governed by a policy rule; decrease B) follow discretionary policy; decrease C) be governed by a policy rule; increase D) follow discretionary policy; increase
When drawn against the current real wage, the labor demand curve shift to the right if
A) the interest rate increases. B) current taxes increase. C) total factor productivity increases. D) future capital increases.
Suppose a sushi restaurant is making significant economic profit in the short run. In the long run
A) more people will open sushi restaurants, reducing the economic profit for each restaurant. B) high barriers to entry keep people from opening sushi restaurants. C) the government will require the sushi restaurant to sell part of its interests in the city. D) more people will open steak restaurants, increasing the economic profit for the sushi restaurant.