Why is the money multiplier in the United States smaller than the inverse of the required reserve ratio?
What will be an ideal response?
The formula for the money multiplier assumes that all loans make their way directly into checking accounts. In reality, people hold part of their loans as cash, and that cash is therefore not available for the banking system to lend out. Also, banks hold excess reserves rather than lending all of them out. For both of these reasons the multiplier is smaller in reality than in the illustrations in this chapter.
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Sailing an ocean cargo ship slower to save on the expense of fuel as opposed to sailing it faster to save time and therefore allow it to make more deliveries makes sense if the ________ of sailing slower is less than the ________ of sailing slower
A) marginal benefit; opportunity cost B) marginal cost; opportunity cost C) marginal benefit; marginal cost D) marginal cost; marginal benefit
In the Hotelling model of spatial competition, profits arise from:
a. monopoly power. b. rents based on locational advantage. c. the ability to price discriminate. d. increasing returns to scale.