If the Fed Reduces the Required Reserve Ratio

question 48

Multiple Choice

If the Fed reduces the required reserve ratio,

• A)excess reserves will increase.
• B)excess reserves will decrease.
• C)total reserves will increase.
• D)total reserves will decrease.

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Definitions:

Natural Monopoly

A market situation where due to high fixed costs or unique production processes, one provider can supply a product or service more efficiently than multiple competitors.

Average Total Cost

The total cost of production divided by the total output or quantity of goods produced.

Downward-sloping Market Demand Curve

This concept depicts the inverse relationship between price and quantity demanded in a market, indicating that higher prices typically lead to lower quantities demanded, and vice versa.

Marginal Revenue

The additional income received from selling one more unit of a good or service; it's a critical concept in business and economics for understanding how to maximize profit.