If the Reserve Ratio Is 12

question 4

Multiple Choice

If the reserve ratio is 12.5 percent,then $2,000 of additional reserves can create up to

• A)$8,000 of new money.
• B)$16,000 of new money.
• C)$32,000 of new money.
• D)None of the above is correct.

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Definitions:

Long Run

A period in economics during which all factors of production and costs are variable, allowing for full adjustment to change.

Average Total Cost Curve

A graphical representation showing how average cost changes with changes in output.

Zero Economic Profits

A situation in perfect competition where firms earn just enough revenue to cover their total costs, including opportunity costs.

Marginal Revenue

Marginal Revenue is the additional income received from selling one more unit of a product.