23. The fractional reserve banking system in the U.S. is based on the practices

Question

23. The fractional reserve banking system in the U.S. is based on the practices of a. the goldsmiths. b. the federal reserve system c. the latest world banking regulations. d. currency speculators. 24. Which of the following is an automatic stabilizer? a. the capital gains tax. b. unemployment compensation C, the corporate income tax. d. the government expenditures multiplier 25. One of the problems associated with using expansionary monetary policy is: a. the potential offsetting effect of state and local economic policies b. the crowding out effect of private investment. c. that it might cause a lot of inflation in the economy. d. all are possible problems. 26. The lags associated with fiscal policy can last as long as: a. 10 months. b. 12 months. c. 14 months. d. 2 years e. 10 years 27. With a reserve ratio of 25, a new deposit at one bank of $100 could lead to a total of how much new money in the banking system? a. $100 b. $200 c. $400 d. $800

Explanation / Answer

Ans

1 C is right. It's nowadays global phenomena

2 unemployment compensation During recession it rises to increase Aggregate demand and during boom it falls so that Govt expenditure reduces

3 c. It usually leads to inflation

4 10 years

5 400 because money multiplier =1/.25=4 and 4(100)=400

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