If the Central Bank of Macroland Puts an Additional 1,000

question 56

Multiple Choice

If the Central Bank of Macroland puts an additional 1,000 units of currency into the economy, the public deposits all currency into the banking system, and banks have a desired reserve/deposit ratio of 0.10, then the banks will eventually make new loans totaling ______ and the money supply will increase by _______.

• A) $1,000; $1,000
• B) $9,000; $9,000
• C) $9,000; $10,000
• D) $1,000; $9,000

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Definitions:

Cournot Duopolists

A scenario in an oligopoly market structure where two firms, known as duopolists, decide on the quantity to produce independently and simultaneously with the goal of maximizing profit.

Marginal Costs

The boost in cost necessitated by the output of one more unit of a product or service.

Demand for Wine

The desire or need by consumers to purchase wine, which varies depending on factors like price, income levels, and personal preferences.

Reaction Function

A mathematical representation in economics that indicates how one player's action responds to the actions of another in a strategic setting.