When the Fed Sells $100 Million of Securities to a Commercial

question 173

Multiple Choice

When the Fed sells $100 million of securities to a commercial bank,the

• A)monetary base increases.
• B)money supply increases.
• C)bank's reserves decrease.
• D)required reserve ratio decreases.
• E)bank's reserves do not change.

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Definitions:

Units-Of-Production Depreciation

A method of depreciation that allocates an asset's cost based on its usage, productivity, or units of production, rather than the passage of time.

Activity Bases

Criteria or units of measure used to allocate costs in activity-based costing, reflecting the extent to which cost drivers are used or consumed.

Total Variable Cost

The sum of all costs that vary directly with the level of production or output.

Fixed Cost Per Unit

The total fixed costs of production divided by the number of units produced, decreasing as production volume increases.