1. Unemployment and recessions are sometimes necessary to curb high inflation. A
ID: 1212646 • Letter: 1
Question
1. Unemployment and recessions are sometimes necessary to curb high inflation. A) True B) False 2. Investments are actions that incur costs today but provide expected benefits in the future. A) True B) False 3. Investment is a smaller component of GDP than consumption, but it is a more stable component. A) True B) False 4. Banks prefer to make loans than keep reserves because they earn interest on loans but not reserves. A) True B) False 5. A bank's required reserves are the fraction of deposits they are required by law to hold as reserves. A) True B) False
Explanation / Answer
Q2. Investment implies net addition to the capital stock such as machinery, equipment, building, and factories etc. of an economy.
Capital stock enables the production in an economy. So, when investment is undertaken, it leads to addition to the capital stock of an economy which in result enable the economy to produce more goods and services in the coming time period.
Thus, investments are, indeed, actions that are taken today but whose benefit accrues in future.
Hence, the correct answer is True.
Q5. Required reserves refres to the fraction of total deposits that a bank is required to hold with it as mandated by law.
Hence, the correct answer is True.
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