In a simplified banking system in which all banks are subject to a 10 percent required reserve ratio, a $1,000 open market sale by the Fed to a bank would cause the money supply to:
a. increase by $1,000.
b. increase by $100,000.
c. decrease by $10,000.
d. decrease by $1,000.
e. remain unchanged.
c
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If profits are high because the price level rose,
A) the AS curve shifts leftward. B) it is likely the result of an increase in the real wage rate. C) business failures rise and the quantity of real GDP supplied increases. D) new businesses open and the quantity of real GDP supplied increases. E) potential GDP must be decreasing.
In the long run ________
A) the amount of output an economy can produce is determined by real variables like capital, labor and technological advances B) aggregate supply is fixed at the potential level of output C) there is enough time for prices to fully adjust so the classical dichotomy holds D) all of the above E) none of the above