Commercial Banking System

Question

​Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:

​Mrs. Arnold should spend more on soda and less on pretzels

​Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts

​the two commodities are substitute goods

​Mrs. Arnold should spend more on pretzels and less on soda

Question

The simple circular flow model shows that:

​households are on the selling side of the resource market and on the buying side of the product market.

​businesses are on the selling side of both product and resource markets.

​households are on the buying side of both product and resource markets.

​businesses are on the buying side of the product market and on the selling side of the resource market.

Question

Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of U.S. securities from the public, which deposits this amount into checking accounts. As a result of these transactions, the supply of money is:​

​directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $16 million.

​not directly affected, but the money-creating potential of the commercial banking system is increased by $12 million.

​directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million.

​directly reduced by $4 million and the money-creating potential of the commercial banking system is decreased by an additional $12 million.

Question

As output increases, total variable cost:​

​increases at a constant rate

​increases at a decreasing rate and then at an increasing rate

​increases continuously at a decreasing rate

​increases more rapidly than does total cost