Banks Would Be Expected to Minimize Holding Excess Reserves Because

question 18

Multiple Choice

Banks would be expected to minimize holding excess reserves because this practice is:

• A) illegal.
• B) not profitable.
• C) technically difficult.
• D) subject to a stiff excess reserves tax.

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Definitions:

Average Total Costs

The total costs of production (fixed plus variable) divided by the total quantity of output produced, expressing the cost on a per-unit basis.

Economies of Scale

The savings that organizations achieve through their size of operation, where the expense per produced unit consistently decreases with an upscaling in operation.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's size or output increases beyond a certain point.

U-shaped

A description often used to illustrate how certain economic variables, such as average cost, behave, initially decreasing with increased activity and then increasing.