Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash. An open market purchase of $1 million by the Fed will see banking system deposits increase by:
A. more than $1 million but less than $10 million.
B. more than $10 million but less than $20 million.
C. less than $1 million.
D. exactly $1 million.
Answer: A
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The term "quantity demanded" refers to the
A) total amount of a good that is actually purchased during a given period of time. B) total amount of a good that people wish to buy, regardless of price. C) total amount of a good that purchasers wish to purchase at a given price during a given period of time. D) product of advertising, and is unrelated to price. E) entire relationship between desired purchases and possible prices.
When insurance companies offer fair insurance,
A) risk-averse agents always purchase it. B) risk-neutral agents never purchase it. C) risk-loving agents always purchase it. D) nobody would purchase fair insurance.