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How commercial banks "create money" Commercial banks obviously cannot influence the amount of currency in the economy or the monetary base, since they are not allowed to print
Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different income streams.
Think of a business firm you recently visited (such as Walmart, Home Depot, Red Lobster, Barnes & Noble, McDonald's, etc.). What motivated the producers of all the individual produ
Suppose a consumer's income increases from $30,000 to $36,000. As a result, the consumer increases her purchases of compact disks (CDs) from 25 CDs to 30 CDs. What is the consumer'
Assume Workers Comp awards $X to workers not working because of injury. $X is set to equal the workers previous wages. Once workers return to work, the award payments stop. Suppose
The Transmission Mechanism The mechanism by which the changes in monetary policy affect aggregate demand is called 'transmission mechanism'. Two stages in transmission mechanis
A rise in the real wage will bring a decrease in the quantity demanded of labor because of diminishing returns in production. As more and more labor is employed, it is increasingly
Bruno's Lunch Counter is expanding and expects operating cash flows of $26,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets wil
The annual income from an apartment complex is $20,664. The annual expense is estimated to be $3,414. The apartment complex could be sold for $146,499 at the end of 10 years. If yo
according to the Keynesian model, the short-run aggregate supply curve is horizontal when: A: there are unemployed resources and prices do not fall when aggregate demands falls. B:
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