A customer of Bank A writes a $20,000 check for a new car, which the car dealer deposits in his bank, Bank B. Which of the following statements pertaining to this transaction is most true?
A. Neither Bank A's nor B's reserves will change
B. Banks A's reserves will decrease by the required reserve rate times $20,000 and Banks B's reserves will increase by (1- required reserve rate) times $20,000
C. Bank B's reserves will decrease and Bank A's reserves will increase by $20,000
D. Bank A's reserves decrease by $20,000 and Bank B's reserves increase by $20,000
Answer: D
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You explain to your friend Haslina, who runs a catering service called "Meals in a Zip," about an economic theory which asserts that consumers will purchase less of a product at higher prices than they will at lower prices
She contends that the theory is incorrect because over the past two years she has raised the price of her catered meals and yet has seen a brisk increase in sales. How would you respond to Haslina? A) Haslina is making the mistake of assuming that correlation implies causation. B) I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income. C) I will explain to her that she is making the error of reverse causality: it is the increase in demand that has enabled her to raise her prices. D) Haslina is right; she has evidence to back her claim. The theory must be erroneous.
A sale in which property or a service is sold to the highest bidder is called a(n)
A) auction. B) bidder sale. C) competitive market. D) Austrian bundle.