How Does the Fed Increase the Level of Reserves in the Banking

question 140

Multiple Choice

How does the Fed increase the level of reserves in the banking system?

• A) by lowering interest rates
• B) by raising interest rates
• C) by selling bonds
• D) by buying bonds

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Definitions:

Downsloping

describes a trend or curve that goes downward, often used in economics to describe demand curves where price decreases lead to an increase in quantity demanded.

Economic Profits

Profits exceeding the opportunity costs of a venture or investment, accounting for both explicit and implicit costs.

Normal Profits

The level of profit necessary to keep a firm in an industry, equating to the opportunity cost of capital and entrepreneurship.

Marginal Cost

The financial commitment needed for producing an extra unit of a good or service.