When externalities exist, economic efficiency is achieved when marginal private benefit equals ...

When externalities exist, economic efficiency is achieved when marginal private benefit equals marginal private cost.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 2

If the required reserve ratio is 0.2, and the Fed buys 3,000 of U.S. government securities, the maximum amount by which the money supply can increase is:
 a. 200.
 b. 2,000.
 c. 600.
 d. 15,000.
  e. 1,500.

QUESTION 3

When current production of goods and services in an economy is greater than planned aggregate expenditure, _____.
 a. inventories of goods and services will increase
 b. firms will increase production to replenish depleted inventories
 c. businesses and households will increase planned aggregate spending
 d. the price level will automatically rise to restore equilibrium in the economy
  e. leakages must equal planned injections

QUESTION 4

Competitive firms consider private costs, but disregard external costs, when making their economic decisions.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 5

If an increase of 10 million in excess reserves increases checkable deposits in the banking system by a maximum of 200 million, the required reserve ratio is:
 a. 0.
 b. 5 percent.
 c. 10 percent.
  d. 20 percent.
  e. 2 percent.

QUESTION 6

In the income-expenditure framework, if planned aggregate expenditures are less than real gross domestic product (GDP), _____.
 a. saving will increase
 b. the price level will increase
  c. inventories will increase
 d. inventories will decrease
 e. consumption will decrease

QUESTION 7

The social marginal cost curve is higher than the private marginal cost curve.
 a. True
  b. False
  Indicate whether the statement is true or false

QUESTION 8

Suppose checking deposits increase by 6,000 after all rounds of the money-creation process when the Fed buys 1,200 worth of U.S. government securities. This implies that the maximum value of the required reserve ratio is:
 a. 5.
 b. 0.75.
  c. 0.2.
 d. 1.2.
 e. 1.0.