Suppose a bank has $10,000 in deposits and $1,000 in reserves. The required reserve ratio is 5%. Which of the following occurs if the required reserve ratio is increased to 10%?
A) The bank's required reserves will decrease to $500.
B) The bank's excess reserves will increase to $1,000.
C) The bank's required reserves will increase to $1,000.
D) The bank's ability to create loans increases by 5%.
Ans: C) The bank's required reserves will increase to $1,000.
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Which of the following statements is NOT true about inflation?
A) Inflation is a sustained increase in the average prices of goods in the economy. B) During an inflationary period, the prices of some goods will increase while the price of some goods will decrease. C) When there is inflation, the purchasing power of a dollar decreases. D) During an inflationary period, the prices of all goods will increase.
The concept of price elasticity of demand measures the
A. number of buyers in a market. B. slope of the demand curve. C. extent to which the demand curve shifts as the result of a price decline. D. sensitivity of consumer purchases to price changes.