Assume That the Required Reserve Ratio Is 25

question 201

Multiple Choice

Assume that the required reserve ratio is 25%. If the Fed buys $5 million worth of government bonds from the public, the maximum change in the money supply is:

• A) 1.25 million.
• B) more than 5 million.
• C) less than 5 million.
• D) $125 million.

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Definitions:

Machine-hours

measures the total time that machines are operating, often used as a basis for allocating manufacturing overhead to products.

Fixed Cost

Fixed costs are unaffected by the volume of production or sales, covering expenditures like rental fees, salaries, and insurance charges.

Assembly Department

A section or division within a manufacturing facility where various components are assembled into final products, playing a crucial role in the production process.

Service Costs

Service costs entail the expenses associated with providing services, including labor, materials, and overhead.