Author Question: In 2012, Canadian farmers did not suffer from drought conditions that affected the United States, ... (Read 115 times)

nramada · **on:** Jun 29, 2018

In 2012, Canadian farmers did not suffer from drought conditions that affected the United States, but they did enjoy the higher corn prices. Canadian farmers reacted to the higher price by planting more corn.

Suppose that the price of corn increased by 30 percent and the Canadian farmers increased the quantity of corn they supply by 20 percent. The supply of corn is A) perfectly inelastic.
B) unit elastic.
C) elastic.
D) inelastic.

Question 2

Describe how actual reserves are calculated and explain the difference between desired reserves and excess reserves. How do reserves affect the amount of loans a bank can make?

What will be an ideal response?

Ashley I · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

Actual reserves are equal to the bank's reserves it keeps on deposit at the Federal Reserve plus the currency in the bank's vault. Desired reserves are the reserves that the bank wants to hold. The amount of desired reserves is equal to the desired reserve ratio multiplied by the bank's deposits. Excess reserves equal actual reserves minus desired reserves. A bank can make loans equal to the amount of its excess reserves.