Author Question: The marginal product of a country's workers falls during winters due to excessive cold. Which of the ... (Read 46 times)

PhilipSeeMore · **on:** Jun 30, 2018

The marginal product of a country's workers falls during winters due to excessive cold. Which of the following is likely to happen in this case, assuming all else equal?

A) The country's labor demand curve will shift to the right in winter.
B) There will be an upward movement along the labor demand curve.
C) The country's labor demand curve will shift to the left in winter.
D) There will be a downward movement along the labor demand curve.

Question 2

Why is the money multiplier in the United States smaller than the inverse of the required reserve ratio?

What will be an ideal response?

emsimon14 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

The formula for the money multiplier assumes that all loans make their way directly into checking accounts. In reality, people hold part of their loans as cash, and that cash is therefore not available for the banking system to lend out. Also, banks hold excess reserves rather than lending all of them out. For both of these reasons the multiplier is smaller in reality than in the illustrations in this chapter.