The Fed's power to set the required reserves of commercial banks:
A. provides a certain source of interest income for commercial banks.
B. allows the Fed to control the lending ability of commercial banks and, thereby, control the money supply.
C. prevents banks from hoarding too much vault cash.
D. prevents commercial banks from earning excess profits.
Answer: B
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Which of the following would not lead to a change in the supply of chocolate ice cream?
a. a change in productive capacity b. a change in the price of strawberry ice cream c. a change in the price of milk d. a change in the price of chocolate ice cream e. a change in the expected future price of chocolate ice cream
In order for a natural monopoly to develop, it
a. is important that the firm be very large. b. is important that the firm prices its product below cost. c. is not the absolute size of the firm but its size relative to the total market demand that is important. d. must be in the presence of government intervention.