If you deposit $8,000 in a bank, calculate how much the bank must keep as required reserves and how much it can loan out if the required reserve ratio was 5 percent. If it was 8 percent? 13 percent? 26 percent?
With a required reserve ratio of 5 percent, required reserves = $400 and loanable funds = $7,600.
With a required reserve ratio of 8 percent, required reserves = $640 and loanable funds = $7,360.
With a required reserve ratio of 13 percent, required reserves = $1,040 and loanable funds = $6,960.
With a required reserve ratio of 26 percent, required reserves = $2,080 and loanable funds = $5,920.
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The infant industry argument is that:
a. those industries that produce products for infants should be protected. b. developing industries should be allowed to face foreign competition. c. protectionism should be used to create a level playing field for the domestic firms to compete with foreign firms. d. protectionism promotes complete specialization in the country on the basis of comparative advantage. e. new industries should be protected from foreign competition until they have had adequate time to develop.
The term prisoners' dilemma
a. refers only to situations where prisoners' must confess on one another. b. is in agreement with Adam Smith's invisible hand idea. c. represents situations where people do not act in their own self interest. d. can be applied to show why cartels are difficult to maintain.