Which of the following is an act of economic "investment"?
A. A teacher deposits $500 in a retirement account.
B. An entrepreneur buys 5,000 shares of stock at $5 a share and then sells the stock at a profit for $60 a share.
C. A brewer purchases a new fermentation system for his beer.
D. The state legislature authorizes the sale of a state park.
Answer: C
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The simple money multiplier: a. equals the reciprocal of the required reserve ratio
b. assumes banks hold excess reserves. c. becomes larger as the required reserve ratio increases. d. equals required reserves plus excess reserves. e. equals total reserves minus required reserves.
Automatic stabilizers are government programs that:
a. exaggerate the ups and downs in aggregate demand without legislative action. b. bring expenditures and revenues automatically into balance without legislative action. c. shift the budget toward a deficit when the economy slows but shift it toward a surplus during an expansion. d. increase tax collections automatically during a recession.