If the Required Reserve Ratio Is 0

question 134

Multiple Choice

If the required reserve ratio is 0.2,and the Fed buys $3,000 of U.S.government securities,the maximum amount by which the money supply can increase is:

• A)$200.
• B)$2,000.
• C)$600.
• D)$15,000.
• E)$1,500.

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Definitions:

Fixed Overhead

The total of all costs that do not vary with production volume, including salaries, rent, and insurance.

Variable Overhead

Costs that fluctuate with production volume, such as utilities and indirect materials, which are not constant like fixed overhead costs.

Direct Labor

Labor costs directly attributable to the production of goods, including wages of workers who are actively involved in the manufacturing process.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute an integral part of the finished product.