In February, 2010 the U.S. M1 money multiplier crashed to 0.786. Each $1 increase in the monetary base resulted in the quantity of money increasing by only $0.79. Where did the remaining $0.21 disappear?
A) Banks held part of the $0.21 as excess reserves.
B) Banks loaned out the $0.21.
C) Consumers held part of the $0.21 as currency.
D) Both A and C are correct.
D
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Suppose the only two goods you care about in the world are French wine (x) and Cuban cigars (y) and your utility function is given by u(x,y)=xy. You have no income, and the only thing in the world you possess is a large box you have just inherited from your rich uncle who passed away last week (of liver and lung cancer.) You open the box, and much to your liking, you find it contains 9 bottles of fine French wine and 3 boxes of exquisite Cuban cigars. Currently, the wine sells for $1 per bottle, and the cigars sell for $9 per box. Just as you receive the inheritance, you read the headline: "President Lifts Embargo - Price of Cuban Cigars Falls to $4 per Box!" a. Determine the income (or wealth) and substitution effects of a decrease of the price of cigars from 9 to 4. (Assume
fractions of bottles and cigars can be bought.) b. Are cigars a normal or inferior good for you? c. How much would you have been willing to pay the President in order not to lift the embargo? What will be an ideal response?
A movement along the aggregate production function is the result of a change in
A) the quantity of labor. B) technology. C) capital. D) interest rates.
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country A could not make would be:
A. (500 iPods, 150 tablets). B. (500 iPods, 200 tablets). C. (500 iPods, 250 tablets). D. (500 iPods, 300 tablets).
Proponents of strategic trade policy contend that:
a. government should tax domestic firms to generate greater revenues. b. government should encourage imports to prevent monopoly in the domestic market. c. government should provide subsidies to domestic firms with decreasing costs. d. government should discourage domestic firms with decreasing costs from continuing production. e. government should tax domestic import competing firms.