Answer:
The correct answer is letter "B": unfavorably; increases.
Explanation:
As a measure to control inflation in the economy, the Federal Reserve (Fed) tends to <em>increase </em>the interest rate. This to have banks request fewer loans from the central bank which will result in offering fewer credits to individuals. If people have fewer sources of debt, the possibilities that an economic bubble -<em>continuous increase in price due to continuous increase in demand</em>- appear decreases.
However, if people have fewer sources of debt, private investment decreases, causing an <em>unfavorable </em>panorama for financial institutions offering large portfolios of assets.
Answer: C. government cannot have buying power
Explanation:
Answer:
1. Total implicit cost per year = $66,000
2. Total cost per year = $337,000
Explanation:
Given:
Salary = $60,000
Investment = $100,000
Rent = $75,000
Wages = $190,000
Materials and utilities = $6,000
Rate of return = 6%
Computation:
1. Total implicit cost per year:
Total implicit cost per year = Salary give up + Return on investment
Total implicit cost per year = $60,000 + ($100,000 x 6%)
Total implicit cost per year = $60,000 + $6,000
Total implicit cost per year = $66,000
2. Total cost per year:
Total cost per year = Total implicit cost per year + Rent + Wages + Materials and utilities
Total cost per year = $66,000 + $75,000 + $190,000 + $6,000
Total cost per year = $337,000
Answer:
the money supply in Macroland will increase from <u>5,000</u> econs to <u>7,000</u> econs
Explanation:
Currently, Macroland's money supply = 2,000 econs held by the public and 3,000 econs held by the banks (= 300 econs x 1/0.1).
In order to determine the increase in the money supply we must multiply the inflow of econs by the money multiplier. The money multiplier = 1 / reserve ratio = 1/0.1 = 10.
Since the government is injecting 200 econs to the economy, the increase in the money supply = 200 econs x 10 = 2,000 econs.
So now, Macroland's money supply will increase from 5,000 to 7,000 econs.
The money multiplier measures the banking system's ability to "create" money. The banking system creates money by first receiving deposits, e.g. you deposit 10 econs in your savings account, and then lending money to another client. The bank will lend 9 econs (-10% required reserve) to John that will purchase a bike. The seller of the bike receives the money form John and deposits the 9 econs in his own bank. Then this second bank will lend 8.10 econs to Sarah. Sarah will use the money to purchase a new computer and a printer from Tom. Tom then deposits the money in his bank, and then his bank lends 7.29 econs to Sally, and the wheel goes on and on.
This money creating process is possible because Macroland uses a fractional banking system, which means that the banks are only required to keep a fraction of total deposits as reserves.
