Answer the following statements true (T) or false (F)
1. When you deposit money at a bank, the bank will normally turn around and lend most of it to a borrower.
2. If all depositors of a bank were to try withdrawing all their deposits at the same time, a good solid bank should be able to meet all the withdrawals.
3. When cash is deposited at a bank, the composition of the money supply is changed but the total supply of money is not.
4. When a bank's loan defaults, then the bank's reserves will decrease.
5. The amount of required reserves that a bank must hold is computed as a certain fraction of the bank's assets.
1. True
2. False
3. True
4. False
5. False
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Critically evaluate the following statement. "Since monopolies are by definition a one-firm industry they are able to charge the consumer the highest price possible."
What will be an ideal response?
Answer the following statements true (T) or false (F)
1. Better Business Bureaus in various cities exist partly in order to try to deal with inadequate buyer information about sellers. 2. A moral hazard problem occurs before a transaction - when people alter their behavior before they sign a contract, imposing costs on the other party. 3. Adverse selection is when someone with home insurance decides to take the chance that a dying tree would fall on the garage, rather than spend the money to have the tree cut down. 4. When the government bails out large banks when the banks become unstable, it could lead to a moral hazard problem.
Which of the following would lead to a rise in demand for recordable DVDs by students?
a. An increase in the number of DVD manufacturers. b. A decrease in the price of DVD recording devices. c. A decrease in the price of the DVD making machinery. d. A cut in the number of student workers hired by the university, lowering student incomes.
Let S = y - (100 + 0.75y). Assume no government or foreign sectors. At the equilibrium level of income, y* = 400, the level of investment is
A) 0. B) 75. C) 300. D) 400.