Questions from General Economics

Q: If the reserve ratio is ¼ and the central bank increases the

If the reserve ratio is ¼ and the central bank increases the quantity of reserves in the banking system by $120, the money supply increases by a. $90. b. $150. c. $160. d. $480.

Q: A bank has capital of $200 and a leverage ratio of

A bank has capital of $200 and a leverage ratio of 5. If the value of the bank’s assets decline by 10 percent, then its capital will be reduced to a. $100. b. $150. c. $180. d. $185.

Q: Which of the following actions by the Fed would reduce the money

Which of the following actions by the Fed would reduce the money supply? a. an open-market purchase of government bonds b. a reduction in banks’ reserve requirements c. an increase in the interest rat...

Q: If the central bank in the preceding question instead holds the money

If the central bank in the preceding question instead holds the money supply constant and allows the interest rate to adjust, the change in aggregate demand resulting from the increase in government p...

Q: Which of the following is an example of an automatic stabilizer?

Which of the following is an example of an automatic stabilizer? When the economy goes into a recession, a. more people become eligible for unemployment insurance benefits. b. stock prices decline, pa...

Q: If the central bank wants to expand aggregate demand, it can

If the central bank wants to expand aggregate demand, it can ________ the money supply, which would ________ the interest rate. a. increase, increase b. increase, decrease c. decrease, increase d. dec...

Q: If the Federal Reserve increases the rate of money growth and maintains

If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will __________ and the short-run Phillips curve will shift __________....

Q: The Condorcet paradox illustrates Arrow’s impossibility theorem by showing that pairwise majority

The Condorcet paradox illustrates Arrow’s impossibility theorem by showing that pairwise majority voting a. is inconsistent with the principle of unanimity. b. leads to social preferences that are not...

Q: When an adverse supply shock shifts the short-run aggregate-

When an adverse supply shock shifts the short-run aggregate-supply curve to the left, it also a. moves the economy along the short-run Phillips curve to a point with higher inflation and lower unemplo...

Q: Advocates of the theory of rational expectations believe that a.

Advocates of the theory of rational expectations believe that a. the sacrifice ratio can be much smaller if policymakers make a credible commitment to low inflation. b. if disinflation catches people...