For a Given Level of Reserves, a Decrease in the Reserve

question 161

Multiple Choice

For a given level of reserves, a decrease in the reserve requirement ratio will

• A)decrease legal reserves and decrease the money supply.
• B)increase legal reserves and decrease excess reserves.
• C)decrease legal reserves and decrease excess reserves.
• D)increase excess reserves and increase the money supply.

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Definitions:

Capitalized

Expenses or costs that are recorded as an asset on a balance sheet rather than expensed, with the anticipation of future benefit.

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.

Fixed Costs

Expenses that remain constant regardless of business activity levels, including long-term leases, salaries, and insurance premiums.

Variable Cost

A cost that varies with the level of output or production volume.