When her $1,000 time deposit expires, Suneeta decides not to renew the time deposit and opts to cash out. As a result of her transaction
A) M1 and M2 increase.
B) M1 increases and M2 decreases.
C) M1 is unaffected and M2 decreases.
D) M1 increases and M2 is unaffected.
Ans: D) M1 increases and M2 is unaffected.
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Imagine that Wingate National is a new bank, and that the legal reserve requirement is 10 percent. If it accepts a $1,000 cash deposit and immediately makes a $100 loan, its demand deposits, before any checks on its accounts are actually written, are
a. $1,000 b. $1,100 c. $900 d. $990 e. $110
When negative externalities exist in the production of a good, the marginal social cost of producing the good:
A. is less than the marginal cost borne by the firm. B. equals the marginal cost borne by the firm minus marginal cost borne by a third party that results from the production and consumption of the good. C. equals the marginal cost borne by the firm plus the marginal cost borne by third parties from the production and consumption of the good. D. is equal to the marginal benefit received by consumers if competitive markets exist and there is no government intervention.