Explain why banks can influence the money supply if the required reserve ratio is less than 100 percent
When the reserve requirement is less than 100 percent, banks can lend out deposits. The money they lend out is redeposited. In this way, deposits can be greater than reserves. Since deposits are greater under fractional-reserve banking and since deposits are part of the money supply, the money supply will be greater under fractional-reserve banking.
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Which of the following are weaknesses of a command-based economic system?
a. It is not possible for goods to be allocated based on need rather than based on willingness and ability to pay. b. Producers have incentives to innovate because successful innovators are not rewarded with higher profit. c. Since price is set by central planners, price cannot freely adjust to resolve shortages or surpluses based on current supply and demand conditions. d. Answers b. and c. above are correct.
One indication that an industry might be oligopolistic is that prices change
a. infrequently. b. frequently. c. in rhythmic patterns. d. on a regular, periodic basis.