If Banks Do Not Loan Out All Their Excess Reserves,then

question 118

Multiple Choice

If banks do not loan out all their excess reserves,then the real world multiplier is

• A)smaller than 1/RR.
• B)larger than 1/RR.
• C)equal to 1/RR.
• D)not related to 1/RR.

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Definitions:

Operating Expenses

Operating expenses are the costs associated with running a business’s core operations on a day-to-day basis, excluding the cost of goods sold.

Minimum Required Rate of Return

The minimum return on an investment that is deemed acceptable, based on the risk tolerance of an investor or a company.

Variable Cost per Unit

The cost associated with producing one unit of a product, which varies with the level of production or sales volume.

Annual Fixed Costs

The total fixed costs a company incurs over a year, which do not vary with the level of production or sales.