If the Fed Wanted to Expand the Money Supply as Part

question 97

Multiple Choice

If the Fed wanted to expand the money supply as part of an antirecession strategy, it could

• A) increase the interest rate paid on excess reserves encouraging banks to extend more loans.
• B) decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
• C) decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
• D) increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.

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Definitions:

Direct Labor-Hours

The total number of labor hours spent on producing a single unit of a product or service.

Fixed Manufacturing Overhead

Costs that do not vary with production volume, such as rent, salaries of permanent staff, and depreciation of factory equipment.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to individual units of production based on a certain activity base.

Variable Manufacturing Overhead

Costs that vary with production volume, such as indirect materials and utilities, related specifically to the manufacturing process.