"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect
What will be an ideal response?
The statement is incorrect on two dimensions. First, a bank can use excess reserves to buy government securities as well as make loans. Second, a bank is not allowed to use its required reserve to buy U.S. government securities. Required reserves must be kept in the form of reserves, which are either reserve deposits the bank has made at the Federal Reserve or cash in the bank's vault.
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The tax burden will fall most heavily on sellers of the good when the demand curve
A. is relatively flat, and the supply curve is relatively steep. B. is relatively steep, and the supply curve is relatively flat. C. and the supply curve are both relatively flat. D. and the supply curve are both relatively steep.
In the AS/AD model, an increase in the money supply causes an increase in the interest rate and an increase in investment spending.
Answer the following statement true (T) or false (F)