When the Fed buys a $10,000 bond from a bond dealer
A) reserves of the banking system remain unchanged, but the money supply increases by $10,000.
B) reserves of the banking system increase by $10,000, but the money supply will only be able to increase by something less than this amount.
C) reserves of the banking system increase by $10,000, but the money supply can increase by more than $10,000.
D) reserves of the banking system remain unchanged, but the money supply decreases by $10,000.
C
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If inventories decline by more than analysts predict they will decline, this implies that
A) actual investment spending was equal to than planned investment spending. B) there is no relationship between actual investment spending and planned investment spending. C) actual investment spending was greater than planned investment spending. D) actual investment spending was less than planned investment spending.
A firm uses an efficiency wage scheme to deter workers from shirking, which is detected 10% of the times. Suppose a risk-neutral worker. The industry ongoing wage is $3,000. The efficiency wage paid by this firm is $8,000. What is this worker's reservation wage?
A) $400 B) $500 C) $1,000 D) $1,500