Which of the following statements about the banking system is correct? Select one: a. Commercial banks can increase base money by giving out new loans every year. b. The policy rate is determined by the supply and demand of the money market. c. None of the answers listed is correct. d. The policy rate is the rate at which the central bank lends to commercial banks. e. The real interest rate is the interest rate at which the central bank lends to commercial banks. Which of the following statements is correct? Select one: a. Buying a share at a price above its fundamental value in the hope that someone else would buy it from you at an even higher price is guaranteed to lose money, b. If there is no new information regarding the future profitability of systematic risk of a firm, but its share price keeps rising the fundamental value must be increasing c. None of the listed answers is correct. d. All investors always agree on the fundamental value of the shares in a firm e. The fundamental value of the shares in a firm is determined by expected future profits and systematic risk. Which of the following statements regarding the multiplier is correct? Select one: a. If two countries were identical except for the share of credit-constrained households, then the country with the higher share would have a smaller multiplier. b. Taxation and imports are leakages from the circular flow of income, which reduce the size of the multiplier c. An increase in the level of exports leads to a higher multiplier d. The multiplier is constant over the business cycle, e. None of the answers listed is correct Which of the following statements is correct regarding the difference between markets and firms? Select one: a. Firms involve a decentralisation of power, while markets represent a concentration of economic power. b. It is possible to employ division of labour within firms, while it is not possible in markets. c. Working in a firm involves accumulation of firm-specific assets that will be lost if the connection to the firm is severed. d. Transactions within firms operate as contracts. Market transactions are not contracts. e. None of the listed answers is correct. Consider a local economy comprising of just two firms, Firm U and Firm V. Currently both firms have low capacity utilization. When both firms invest, profits of each firm is 50. When no firm invests, profits of each firm is 30. When one the firms invest and the other one does not, the firm that invests get 50 - x while the firm that does not invest gets 30-y Suppose 0