Answer:
D. lowers the discount rate but not if it auctions more credit
Explanation:
Discount rate adjustment and Federal Reserve's auction have the following effects on reserves.
Discount rate adjustment: a <em>higher discount rate</em> will encourage investment in the US economy, thus leading to <em>increased reserves</em> as investment inflows increase.
On the other hand, a <em>lower discount rate</em> encourages investment outflow into other jurisdictions with higher yields, <em>thus reducing reserves</em>.
Auction: <em>auctioning more credit</em> will result in the movement of investment flows into the Federal Reserve (<em>an increase in reserves</em>) as investors invest in auctions. Vice versa.
Therefore, a mix of lower discount rate and not auctioning more credit will result in lower reserves.
Answer: $1,700
Explanation:
The expected winning bid is the weighted average of the 2 different bids.
Half of the bids are for $1,500 so weight of $1,500 is 0.5.
Half of the bids are for $1,900 so weight of $1,900 is 0.5.
Expected Winning bid = (1,500 * 0.5) + ( 1,900 * 0.5)
= 750 + 950
= $1,700
Answer:
2 more cars will be produced in the market equilibrium versus the social optimum. The right answer is a.
Explanation:
According to the given data we have the following:
demand for cars is given by the function P = 75 − 3q
private costs are given by the function P = 10 + 2q
75 − 3q= 10 + 2q
Therefore, 65=5q
q=13
P=36
Therefore, socially optimal number of cars is 13.
To calculate How many more cars will be produced in the market equilibrium versus the social optimum, we have to calculate the following:
social cost=10+2q+10
=20+2q
75 − 3q=20+2q
55=5q
q=11
P=20+2(11)=42
Therefore, Qm-Qs=13-11
Qm-Qs=2
2 more cars will be produced in the market equilibrium versus the social optimum
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