Reserves That Banks Are Required by Law to Keep on Hand

question 101

Multiple Choice

Reserves that banks are required by law to keep on hand to back up their deposits are called

• A) required reserves.
• B) borrowed reserves.
• C) actual reserves.
• D) excess reserves.

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Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Long-Run Cost Curve

A graphical representation that shows the minimum cost at which any output level can be produced when all inputs are variable.

Economic Profits

The difference between total revenue earned from production and the total opportunity costs of all inputs used in the production process.

Long-Run Equilibrium

A state in which economic forces such as supply and demand are balanced over the long term, with all factors of production and markets adjusting fully to any changes.