1. The discount rate is the:. a. lowest interest rate that banks can charge for loans to their most creditworthy customers. b. interest rate at which banks can borrow reserves from the Federal Reserve. c. lowest interest rate that banks can charge for lending reserves to other banks or financial institutions. d. interest rate at which banks can borrow reserves from other banks. 2. If the Fed were to decrease the discount rate, banks will borrow:. a. more reserves, causing an increase in lending and the money supply. b. fewer reserves, causing an increase in lending and the money supply. c. fewer reserves, causing a decrease in lending and the money supply. d. more reserves, causing a decrease in lending and the money supply.

Consider how health insurance affects the quantity of health care services performed. suppose that the typical medical procedure has a cost of $160, yet a person with health insurance pays only $40 out of pocket. her insurance company pays the remaining $120. (the insurance company recoups the $120 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undergo.) consider the following demand curve in the market for medical care. use the black point (plus symbol) to indicate the quantity of procedures demanded if each procedure has a price of $160. then use the grey point (star symbol) to indicate the quantity of procedures demanded if each procedure has a price of $40. q d at p=$160 q d at p=$40 0 10 20 30 40 50 60 70 80 90 100 200 180 160 140 120 100 80 60 40 20 0 price of medical procedures quantity of medical procedures demand if the cost of each procedure to society is truly $160, the quantity that maximizes total surplus is procedures. economists often blame the health insurance system for excessive use of medical care. given your analysis, the use of care might be viewed as excessive because consumers get procedures whose value is than the cost of producing them.

Choose the statement that is incorrect. a. search activity occurs only in markets where there is a shortage. b. when a price is regulated and there is a shortage, search activity increases. c. the time spent looking for someone with whom to do business is called search activity. d. the opportunity cost of a good is equal to its price plus the value of the search time spent finding the good.

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