Assume That the Reserve-Deposit Ratio Is 0

question 33

Multiple Choice

Assume that the reserve-deposit ratio is 0.4.The Federal Reserve carries out open-market operations,purchasing $1,000,000 worth of bonds from banks.This action increased the money supply by $1,750,000.What is the reserve-deposit ratio?

• A)0)2
• B)0)3
• C)0)4
• D)0)5

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Definitions:

Increasing Return to Scale

A situation in which output increases by a larger proportion than the increase in inputs in the production process.

Long-Run Average Cost Curve

A curve showing the minimum average cost at which a firm can produce any given level of output in the long term, when all inputs are variable.

Small Firms

Small firms are businesses with a relatively small number of employees, limited revenue, and a localized operational base, often contributing significantly to innovation and employment.

Economies of Scale

Cost benefits that companies gain from their operation size, where the cost for each unit of production typically falls as the scale expands.