The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
A) does not increase.
B) increases by $800,000.
C) increases by $1 million.
D) increases by more than $1 million.
Ans: C) increases by $1 million.
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If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit
A) the good should be taxed. B) permits should be required to purchase the good. C) the good could be subsidized. D) the government needs to take no action.
The key characteristics of a monopolistically competitive market structure include
A) many small (relative to the total market) sellers acting independently. B) barriers to entry are strong. C) all sellers sell a homogeneous product. D) sellers have no incentive to advertise their products.
In 1995–7, tax revenue as a percent of GDP
(a) was roughly equal between developing and developed countries. (b) was a few percentage points higher for developed than for developing countries. (c) was a few percentage points lower for developed than for developing countries. (d) was much higher (approximately double) for developed countries than for developing countries. (e) was much higher (approximately double) for developing countries than for developed countries.
Which of the following is true concerning purely competitive industries?
A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run but not in the short run.