Suppose commercial banks have no excess reserves. Then new deposits totaling $1 billion come into the banking system. The required reserve ratio is 20 percent. What is the maximum amount by which banks can increase deposits in the entire banking system? A. $5.0 billion B. $0.5 billion C. $2.5 billion D. $2.0 billion
Prior to the "revolution" in economic thinking introduced by John Maynard Keynes, the "classical" economists had argued that: A. a market economy would produce many "great depressions." B. a market economy did not necessarily generate full employment in the long run. C. a market economy is inherently stable and would always lead to full employment in the long run. D. a market economy was inferior to a centrally-planned economy.