A price floor is a legal minimum on the price at which a good or service can be sold.

A price floor is a legal minimum on the price at which a good or service can be sold.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 2

Assume that there is a 20 billion increase in government purchases. If MPC = 0.8, the sum of the indirect effect on aggregate demand through induced additional consumption purchases is equal to:
 a. 16 billion.
 b. 20 billion.
 c. 80 billion.
 d. 100 billion.

Question 3

Assume that the reserve requirement is 10 percent. A 1,000 cash deposit into a savings account will immediately increase the bank's required reserves by _____.
 a. 10,000.
  b. 500.
  c. 100.
  d. 1,500.
  e. 10.

Question 4

When supply shifts to the left, it would make the surplus from a price floor smaller, other things equal.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 5

If investment decreases by 20 billion and the MPC = 0.8, the resulting decrease in the consumption component of AD is:
 a. 16 billion.
 b. 4 billion.
 c. 100 billion.
  d. 80 billion.

Question 6

If a bank has deposits worth 800,000 . total reserves worth 800,000 . and the reserve ratio of 0.20, what is the value of excess reserves?
 a. 620,000
  b. 1,000,000
  c. 1,160,000
  d. 640,000
  e. 160,000

Question 7

For the quantity exchanged in a market to remain the same, while the price increased, both supply and demand would have to shift to the right.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 8

If government increases its purchases by 20 billion and the MPC = 0.9, the resulting increase in the consumption component of AD is:
 a. 2 billion.
 b. 18 billion.
 c. 180 billion.
  d. 200 billion.

Question 9

Suppose Bank X is holding total cash reserves of 32,000 on deposits of 90,000 . If the reserve requirement is 15 percent, then the excess reserves held by this bank is:
 a. 27,200.
  b. 58,000.
  c. 4,800.
  d. 13,200.
  e. 18,500.

Question 10

For the price in a market to remain the same, while the quantity traded fell, both supply and demand would have to shift to the left.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 11

A 100 billion increase in government purchases would:
 a. increase AD by 500 billion if MPC = 0.8.
  b. decrease AD by 300 billion if MPC = 2/3.
  c. decrease AD by 200 billion if MPC = 0.9.
  d. decrease AD by 40 billion if MPC = 0.4.

Question 12

If a bank's required reserves equal 270,000 . Suppose the bank holds no excess reserves, and the reserve requirement is equal to 18 percent, what is the value of the bank's total deposits?
 a. 900,000
  b. 1,500,000
  c. 48,000
  d. 486,000
  e. 150,000

Question 13

To be binding, a price floor must be set above the equilibrium price.
 a. True
  b. False
  Indicate whether the statement is true or false