If the required reserve ratio is 5 percent, then the simple deposit multiplier is
A) 2.
B) 5.
C) 10.
D) 20.
Answer: D
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The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls, then
A) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. B) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. C) the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn. D) both the income and substitution effects reinforce each other to increase the quantity demanded.
Suppose the Federal Reserve increases bank reserves and banks lend out some of these reserves, but at some point banks still have $5 million more they wish to lend out. If the reserve requirement is 10 percent, how much more money can banks create if they lend out the remaining amount?
a. $55 million b. $50 million c. $45 million d. $40 million
When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:
A. an inferior good. B. the rationing function of prices. C. the substitution effect. D. the income effect.
A good or service or a resource is excludable if
A) it is possible to prevent someone from enjoying its benefits. B) it is not possible to prevent someone from enjoying its benefits. C) its use by one person decreases the quantity available for someone else. D) its use by one person does not decrease the quantity available for someone else.