If the potential money multiplier in the U.S. is 4, then a $2,000 increase in demand deposits when banks hold excess reserves will result in which of the following?
a. the money supply will decrease by $8,000
b. the money supply will remain unchanged because the excess reserves will cancel out the potential loans
c. the money supply will increase by $8,000
d. the money supply will increase by more than $8,000
e. the money supply, if it increases at all, will increase by less than $8,000
E
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For a corporation, an important advantage of selling stocks instead of bonds is that:
a. in the case of a bond, the corporation has to pay a fixed rate of interest, while in the case of a stock, the corporation is not liable to pay any interest. b. in the case of a bond, the corporation has to pay a fixed rate of interest, while in the case of a stock, the corporation earns a fixed rate of interest. c. a bond can generate funds for the corporation only once, while a stock generates funds for the corporation each time it is resold. d. it is difficult to sell a bond because people perceive that a bond is risky, while it is easier to sell a stock because people perceive that it is safe to invest in stock.
The income tax is:
A. an automatic stabilizer because income tax revenues fall as income increases, accelerating an economic expansion. B. an automatic stabilizer because income tax revenues rise as income increases, slowing an economic expansion. C. not an automatic stabilizer. D. an automatic stabilizer because income tax revenues rise as income increases, accelerating an economic expansion.