When a customer deposits 100 into a checking account, it:

When a customer deposits 100 into a checking account, it:
 a. increases the bank's liabilities only.
 b. decreases the bank's liabilities only.
 c. increases the bank's assets only.
 d. decreases both the bank's liabilities and its assets.
  e. increases both the bank's liabilities and its assets.

QUESTION 2

An increase in the price level will:
 a. make the consumption function flatter.
 b. make the consumption function steeper.
 c. increase consumption because wages will increase.
 d. decrease consumption because falling interest rates make it cheaper to borrow.
  e. decrease consumption because the value of net wealth will decrease.

QUESTION 3

As a general rule, if pollution costs are external, firms will produce:
 a. too little of a polluting good.
  b. too much of a polluting good.
  c. an optimal amount of a polluting good.
  d. cannot be determined without additional information.

QUESTION 4

When a customer deposits 1,000 in a bank, the deposit is:
 a. an asset of the Federal Reserve.
 b. included in M1 if it is currently in a commercial bank's vault.
 c. a liability to the customer.
 d. an asset to a commercial bank if it is currently in the bank's vault.
  e. a liability for the bank as the bank owes it to the customer.

QUESTION 5

An upward shift of the consumption function might be caused by:
 a. an increase in disposable income.
  b. a decrease in disposable income.
  c. a decrease in the price level.
  d. a decrease in household wealth.
  e. an increase in the interest rate.

QUESTION 6

All of the following are examples of negative externalities except one. Which is the exception?
 a. Water pollution.
  b. Your roommate going on a diet.
  c. Second-hand smoke.
  d. Loud conversation in the workplace.

QUESTION 7

Which of the following is an asset to a bank?
 a. Checkable deposits
 b. Transaction deposits
 c. Credit cards
 d. Loans
 e. Borrowings from the Fed