Econ 111 - Practice Exam - Solution Key

Econ 111 - Practice Exam - Solution Key - Econ 111 Practice...

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Econ 111 Practice Exam – Solution Key Z.M. Multiple Choice Answers: 1.d 2.b 3.d 4.c 5.b 6.d 7.b 8.c 9.c 10.a 11.d 12.d 13.a 14.d 15.a Short Answers: 4. People who are experienced and educated are likely to find jobs where the equilibrium wage is above the minimum wage. In labor markets where the equilibrium wage is above the minimum wage, the minimum wage does not create unemployment. Since people of ages 20 and over tend to have more experience and education than teenagers, the minimum wage law matters less to them and so creates less unemployment. 2.
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a. If the Fed buys bonds, it pays for them with reserves so banks will have more reserves and can lend more which will create more deposits and so more money. b. If the Fed raises the discount rate banks will borrow less from the Fed, and so have fewer reserves, which decreases the money supply. c. If the Fed raises the reserve requirement, banks will have to hold more of their deposits as reserves and so will have less to lend out. With less to lend out, deposits and the money supply
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Econ 111 - Practice Exam - Solution Key - Econ 111 Practice...

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