Answer the Indicated Question on the Basis of the Information

question 69

Multiple Choice

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet.

-In Table 14.2,if the Fed changes the required reserve ratio to 25 percent,the lending capacity of the banking system will eventually:

• A) Rise by $160 billion.
• B) Fall by $160 billion.
• C) Rise by $40 billion.
• D) Fall by $40 billion.

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Definitions:

Marginal Cost

The elevation in aggregate expenditure associated with creating an additional unit of a product or service.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, reflecting the total gains from undertaking an economic activity.

Marginal Revenue

The extra revenue earned by selling an additional unit of a product or service.

ATC

Stands for Average Total Cost, which is the sum of all costs (fixed and variable) divided by the quantity of output produced.