At One Time,the Country of Sylvania Had No Banks,but Had

question 59

Multiple Choice

At one time,the country of Sylvania had no banks,but had currency of $10 million.Then a banking system was established with a reserve requirement of 20 percent.The people of Sylvania now keep half their money in the form of currency and half in the form of bank deposits.If banks do not hold excess reserves,how much currency do the people of Sylvania now hold?

• A) $2 million
• B) $5 million
• C) $9 million
• D) $12 million

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Definitions:

Fixed Costs

Expenses that remain constant regardless of the amount of production or sales, including rent, wages, and insurance premiums.

Mixed Cost

A cost that contains both fixed and variable components and changes with the level of output but not directly in proportion.

Fixed Cost Element

A component of total costs that does not change with the level of output or activity within a certain range.

Fixed Cost

Costs that do not change with the level of manufacturing activity or output, such as rent, salaries, and insurance premiums.