Which of the following statements is true?
A) The higher the required reserve ratio, the higher the deposit multiplier.
B) The higher the excess reserves, the higher the deposit multiplier.
C) The value of the deposit multiplier falls if economic agents withdraw cash from the banking system.
D) The deposit multiplier only works to increase money supply, not to decrease money supply.
Ans: C) The value of the deposit multiplier falls if economic agents withdraw cash from the banking system.
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A firm is employing capital and labor such that the marginal product of capital is 30 and the marginal product of labor is 10
If the price of a unit of capital is $50 and the price of a unit of labor is $10, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.
Wage differentials exist in the long run because
a. labor markets are perfectly competitive b. all jobs are equally attractive to all workers c. the prices of goods vary by market d. there are too many workers in the labor force e. not all workers are equally qualified to perform every job