If the Desired Reserve Ratio Is One-Third, Currency in Circulation

question 105

Multiple Choice

If the desired reserve ratio is one-third, currency in circulation is $300 billion, and chequable deposits are $900 billion, then the monetary base is ________.

• A) $300 billion
• B) $600 billion
• C) $333 billion
• D) $667 billion

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Definitions:

Administrative Costs

Expenses that are not directly tied to production or sales, such as office expenses, salaries of administrative personnel, and legal fees.

Incremental Income

The additional income that is generated as a result of a specific business decision or activity.

Incremental Costs

Additional costs associated with producing one extra unit of a product or delivering an additional service.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced to the finished product.