The Required Reserve Ratio Is 0

question 52

Multiple Choice

The required reserve ratio is 0.1, the level of deposits is $1,000, the level of currency held by the public is $500, and the level of excess reserves is $100. If the Fed increases the monetary base by $300, then M1 rises by approximately

• A) $3,000.
• B) $2,250.
• C) $643.
• D) $300.

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Definitions:

Markup Percentage

The percentage added to the cost of goods to determine the selling price, reflecting the profit margin on sales.

Variable Costs

Costs that change in proportion to the level of goods or services produced by a business.

Rate of Return

A measure of the profitability or efficiency of an investment, expressed as a percentage of the original investment.

Variable Cost Concept

A principle in economics that refers to costs that vary directly with the level of production or service activity.