Requiring commercial banks to hold reserves equal to some fraction of their deposit liabilities
A) acts as a constraint on bank lending.
B) is an alternative for banks that choose not to use the gold standard.
C) is without significance since banks are not required to meet their liabilities on demand by depositors.
D) prevents runs on banks by depositors who fear that the banks may not have assets equal to their liabilities.
E) really has no effect on the monetary system today.
A
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When a central bank makes joint decisions with the government's Treasury department,
A) the central bank is asserting its independence. B) the government loses its ability to conduct fiscal policy. C) the central bank risks losing credibility. D) the government enhances its credibility.
A production possibilities frontier will be bowed out if
a. there is scarcity b. resources are used efficiently c. production of one good involves an opportunity cost d. resources are not perfectly adaptable to making each good e. technology is improving
The fact that consumers will purchase more of a good that has become relatively cheaper
A. is called the nominal income effect. B. leads to negative marginal utility. C. leads to an upward sloping demand curve. D. is called the substitution effect.
You have just purchased a home that cost $250,000. The nominal mortgage interest rate is 8% per annum, mortgage interest payments are tax deductible, and you are in a 30% tax bracket. The expected inflation rate is 4%. Maintenance and other expenses are 8% of the initial value of the house. What is the real user cost of your house?
A. $24,000 B. $30,000 C. $27,000 D. $20,000