Which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?
A) The Fed sets the required reserve ratio.
B) The Fed is able to affect the level of reserves in the banking system.
C) Banks loan out all of their excess reserves.
D) The simple deposit multiplier is equal to 1 divided by the required reserve ratio.
C
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Suppose you are a U.S. exporter expecting to receive a payment of NZD1,000 (New Zealand dollars) in 12 months. The annual interest rate on NZD deposits is 5 percent, and the annual interest rate on dollar deposits is 9 percent. If the present exchange rate is $0.50 per NZD and interest rate parity holds, how many dollars do you expect to receive at the maturity date of the export contract?
a. $2,000 b. $1,923 c. $1,000 d. $580 e. $520
If two foods are perfect substitutes, the cross elasticity between them is
a. zero b. negative c. between zero and one d. infinite e. there is no specific cross elasticity for perfect substitutes