A Change in the Reserve Requirement Is Used Infrequently by the Fed

question 5

Multiple Choice

A change in the reserve requirement is used infrequently by the Fed because it

• A) is disruptive to the banking system.
• B) does not influence the money supply.
• C) does not affect bank reserves.
• D) does not affect the money multiplier.

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Definitions:

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in no net loss or gain.

Variable Costs

Costs that vary directly with the level of production or volume of output.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the total amount loaned, paid to the lender over a specific period of time.