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An illiquid bank can become insolvent when it:
A) refuses to make promised payments.
B) sells additional stock to obtain funds.
C) sells assets at fire-sale prices to meet liquidity demands.
D) can extend the due dates of its liabilities.
In the circular flow diagram, firms receive revenue from the _____ market, which is
used to purchase inputs in the _____ market.
A) goods; financial
B) factor; financial
C) goods; factor
D) factor; goods
If neither investment nor consumption depends on the interest rate, then the IS curve is
______ and ______ policy has no effect on output.
A) vertical; monetary
B) horizontal; monetary
C) vertical; fiscal
D) horizontal; fiscal
By paying efficiency wages, firms contribute to higher unemployment because they:
A) increase the wage bill.
B) make workers more productive.
C) keep the wage below the equilibrium level.
D) keep the wage above the equilibrium level.
The financial system refers to the:
A) mechanism that transfers wealth from consumers to corporations.
B) institutions that facilitate the flow of funds between savers and investors.
C) arrangements that allow money to circulate in the economy.
D) government regulations that govern the terms of borrowing and lending.
If the consumption function is given by C = 500 + 0.5(Y " T), and Y is 6,000 and T is
given by T = 200 + 0.2Y, then C equals:
A) 2,500.
B) 2,800.
C) 3,500.
D) 4,200.
