If the M1 Multiplier Is 3 and the Fed Engages

question 26

Multiple Choice

If the M1 multiplier is 3 and the Fed engages in open-market sales in the amount of $3 billion, then M1 will

• A)increase by $1 billion.
• B)decline by $1 billion.
• C)decline by $9 billion.
• D)increase by $9 billion.

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Definitions:

Shutdown Point

The level of output at which a company is not making enough revenue to cover its variable costs, making it economically viable to cease production temporarily.

Accounting Profits

The total revenue of a business minus the explicit costs, reported on financial statements according to standard accounting practices.

Economic Profits

The disparity between total income and combined expenses, encompassing both out-of-pocket and hidden costs.

Economic Profits

The margin between an organization's complete earnings and its aggregate expenditures, covering both visible and hidden costs.