"A Bank Can Only Use Its Excess Reserves to Make

question 135

Essay

"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect.

---

Definitions:

Total Cost

The total expense incurred in the production of goods or services, including both fixed and variable costs.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced.

Marginal Cost

The change in total production cost that arises when the quantity produced is incremented by one unit.

Average Total Cost

The total cost of production divided by the number of units produced, which includes both fixed and variable costs.