If the Fed injects additional reserves into the banking system, why will banks generally want to expand their loans and investments?
a. Banks are legally required to expand loans when the Fed creates excess reserves.
b. Maintaining reserves in excess of demand deposits is against the law.
c. Banks fear the Fed will remove the excess reserves.
d. Loans and investments generally earn more interest income for the banks than excess reserves.
D
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Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government's public debt would have
A. decreased by $70 billion. B. decreased by $20 billion. C. increased by $90 billion. D. increased by $20 billion.
Referring to Figure 19.2, the effect of an increase in U.S. prices is represented by a movement from point
A) a to d. B) d to a. C) c to b. D) b to a.
Examining U.S. business cycles over time reveals that they ________
A) occur at regular intervals B) are of uniform duration C) are of similar magnitude D) all of the above E) none of the above
Suppose you are looking to add more capacity to your current manufacturing plant. The new project will cost $6 million up front and is projected to increase revenue $1.5 million a year for each of the next 5 years. If the interest rate is 8%, what is this project's NPV and is it a profitable investment?
A. $10,935; yes it is profitable B. -$10,935; no it is not profitable C. $944,444; yes it is profitable D. -$944,444; no it is not profitable