Consider covered investments between the United States and Japan. If Japanese interest rates decrease, interest arbitrage operations will most likely result in a(n)
A. purchase of yen in the spot market.
B. increase in the forward exchange price of the dollar.
C. sale of dollars in the forward market.
D. increase in the spot exchange price of the yen.
Answer: C
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When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:
A. money is created. B. the bank immediately loses reserves. C. the bank gains new reserves. D. the Fed has made an open-market purchase.
When a country exports something to the rest of the world, domestic consumers ________ because the greater the ________ in price and ________ in quantity bought, the greater is the consumers' loss
A) win; rise; increase B) lose, rise; decrease C) win; rise; decrease D) lose; rise; increase E) lose; fall; decrease
If a natural monopoly has an average cost pricing rule imposed, the rule will
A) maximize total surplus in the regulated industry. B) generate an economic loss for the regulated firm. C) reduce the consumer surplus and generate a deadweight loss when compared to a marginal cost pricing rule. D) set price below marginal cost.
If the Fed lowers the required reserve ratio, __________ in the banking system will remain unchanged but __________ will rise. This will (likely) lead to an increase in new loans and checkable deposits and a(n) __________ in the money supply
A) excess reserves; vault cash; increase B) reserves; vault cash; decrease C) reserves; excess reserves; increase D) reserves; required reserves; increase E) none of the above