The Ratio of Checking Deposits to GDP in the United

question 2

Multiple Choice

The ratio of checking deposits to GDP in the United States between 1960 and 2002

• A) rose sharply, indicating a strong positive correlation between the demand for checking deposits and the real interest rate.
• B) held remarkably constant, indicating no correlation between the demand for checking deposits and the real interest rate.
• C) fell steadily, indicating a positive correlation between the demand for checking deposits and the real interest rate.
• D) fell steadily, indicating, because interest rates were stable over the period, no information about the correlation between the demand for checking deposits and the real interest rate.
• E) none of the above.

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Definitions:

Higher Opportunity Cost

The increased potential loss of choosing one option over another, indicating a sacrifice of higher value alternatives.

Absolute Advantage

The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Comparative Advantage

The capacity of a nation, person, business, or area to generate a product or offer a service with a smaller opportunity cost compared to its rivals.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.