Question

1) Which of the following is an example of a bank diversification?

Select the correct answer below:

a) a bank specializes in extending auto loans

b) a bank holds only mortgages when the housing market is booming

c) a bank will not extend loans to borrowers with subprime credit

d) a bank holds equal amounts of mortgages, small business loans, and car loans.

2) According to the neoclassical economic model, the economy self-adjusts to clear a recessionary gap through

Select the correct answer below:

a) drop in wages which shifts the SR aggregate supply curve up

b) drop in wages which shifts the SR aggregate supply curve down

c) increase in wages which shifts the SR aggregate supply curve up

d) increase in wages which shifts the SR aggregate supply curve down

3) Increases in physical capital and human capital per person, as well as advances in technology lead to

Select the correct answer below:

a) growth in inflation

b) growth in exports

c) growth in GDP

d) growth in unemployment

4) The ability of money to multiply from a given deposit is affected by

Select the correct answer below:

a) the banks choice to hold extra reserves

b) the Fed's policy on the interest rate

c) individual's' choice to use whichever bank they prefer

d) all of the above.

5) __________ is the amount of real GDP an economy can produce by fully employing its existing levels of labor, physical capital, and technology, in the context of its existing market and legal institutions.

Select the two correct answers below.

Select all that apply:

a) Full-employment GDP

b) GDP

c) Potential GDP

d) Real GDP

Answer 1

Q1) option D)

Bank diversification is when bank invests in different types of assets to build a diversified portfolio.

Q2) option B)

Recessionary gap is situation when current GDP level is below the potential level.

So to combat it, in self adjusting Economy, wages fall & SRAS curve shifts downwards, so that GDP level rise.

Q3) option c)

Increase in productive potential raise GDP level in the economy.

Q4). Option A)

Money multiplier depends upon the excess reserves that is held by the bank.

Q5) option A& C.

When economy explores all its productive potential , then resulting output is full employement / potential GDP level.