Because a bank has a very large pool of buyers and savers, it can:
A. diversify the risk of saving and borrowing for individuals.
B. provide liquidity to some individuals that deposit funds.
C. act in the best interest of society by ensuring there is enough money for people.
D. act as an intermediary between firms and government.
Answer: A
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Employing a fixed-weight index like the Consumer Price Index to adjust a person's salary in response to inflation will overcompensate this person because doing so will allow this person to
A) buy the same bundle of goods as he did before the inflation. B) achieve a higher level of utility than he did before the inflation. C) achieve the same level of utility as before the inflation. D) buy more of all goods.
Which of the following statements is true regarding leakages and injections? a. Government transfer payments must equal taxes because one is a leakage and the other is an injection
b. Imports must equal exports since both are leakages. c. Government purchases, investment, and exports are leakages from the circular flow of income and expenditure. d. Savings and net taxes are leakages from the circular flow of income and expenditure. e. Net taxes are an injection into the circular flow, while exports are a leakage.