If the Fed Sells Foreign Assets, the Monetary Base Will

question 66

Multiple Choice

If the Fed sells foreign assets, the monetary base will

• A)fall by the amount of the sale, only if the Fed buys domestic bank deposits with the proceeds.
• B)fall by the amount of the sale, only if the Fed buys domestic currency with the proceeds.
• C)fall by the amount of the sale, whether the Fed buys domestic bank deposits or domestic currency with the proceeds.
• D)rise by the amount of the sale.

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Definitions:

Average Total Cost

The per unit cost of production, calculated by dividing total cost by the total quantity of output produced.

Average Variable Cost

The total variable costs divided by the quantity of output produced, reflecting the per unit cost of variable inputs.

Average Fixed Costs

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, a measure that decreases as production increases.

Average Variable Costs

The sum of all costs that fluctuate based on the amount of production, divided by the total units of output created.