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

Recognize the implications of selling receivables to a factor, including the treatment of service charges.

Grasp the concept of cash realizable value and its calculation in the context of receivables.

Understand how credit card sales are treated by retailers from an accounting perspective.

Differentiate between various methods used for estimating uncollectible accounts.

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Definitions:

Distortionary Tax

A tax that causes people to alter their behavior and make different economic decisions than they would in a free market, potentially leading to inefficiency.

Efficiency

The extent to which resources are utilized optimally to achieve desired outcomes with minimum waste or effort.

Second Best

A concept in economics that suggests if all optimal conditions cannot be satisfied, the second-best option should be pursued.

Distortionary Tax

Taxes that cause people to alter their behavior in a way that distorts the allocation of resources from their most efficient uses.