Question 7 1 pts The reserve ratio for a bank is 10%. What does \"reserve ratio\

Question

Question 7 1 pts The reserve ratio for a bank is 10%. What does "reserve ratio" really mean? The fraction of deposits that the bank keeps in their vaults The fraction of deposits that banks are legally allowed to loan out The fraction of reserves that banks are allowed to invest The fraction of reserves that banks can store at the Federal Reserve itself Question 8 1 pts AD/AS Question: If import costs increase because of a trade war, which of the following do you expect to have happen in the short run? (note & hint: only one curve will shift: either the AD, SRAS, or LRAS, and think about the shifters of each curve). Both inflation and an increase in the unemployment rate (as well as decreased growth rate) will occur Inflation and a decrease in the unemployment rate (as well as increased growth rate) will occur Both deflation and a decrease in the unemployment rate (as well as increased growth rate) will occur Deflation and an increase in the unemployment rate (as well as decreased growth rate) will occur

Explanation / Answer

7) the reserve ratio is the portion of depositors balance that bank should keep in their vaults which is determined by the country's central bank. the first option is correct.

8) When the import cost is increased because of the trade war, supply will be decreased in the short run. SRAS curve shifts to the left. As a result, the price will be increased and the quantity will be decreased. Therefore inflation and unemployment both will be increased in the short run. the first option is correct.

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