Figure 3-1

question 46

Multiple Choice

Figure 3-1. Total cost = Fixed cost + (Variable Rate ´ Output)
Refer to Figure 3-1.In the cost formula above which element would be the independent variable?

• A)fixed cost
• B)total cost
• C)output
• D)variable rate

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Definitions:

Excess Reserves

Funds that banks hold over and above the legal reserve requirements set by central banking authorities.

Reserve Requirement

This is a monetary policy tool used by central banks, specifying the minimum amount of reserves a bank must hold against its deposits. It influences how much money a bank can lend and thus helps control money supply and inflation.

Excess Reserves

The funds that commercial banks hold in their reserves over and above the regulatory requirement set by the central bank.

Reserve Ratio

The fraction of deposits that a bank is required to hold in reserve and not loan out, as mandated by central banking authorities.