Assuming a Required Reserve Ratio of 10% and the Fed

question 39

Multiple Choice

Assuming a required reserve ratio of 10% and the Fed purchased $1 million worth of mortgage-backed securities,make use of the simple deposit multiplier to determine by how much checking deposits would change.

• A) increase by $1 million
• B) increase by $10 million
• C) decrease by $1 million
• D) decrease by $10 million

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Definitions:

Profit Mark-Up

The percentage added to the cost of goods to arrive at the selling price.

Target Selling Prices

The intended price at which a company aims to sell its products, often determined by market conditions and cost considerations.

Target Cost

The desired cost of a product derived from its expected selling price and desired profit.

Life Cycle

The series of stages that a product, project, or service goes through from initial conception to its eventual discontinuation.