The Manager of the Bank Where You Work Tells You

question 120

Multiple Choice

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans.If the reserve requirement is 8.5 percent,how much is the bank holding in excess reserves?

• A)$15 million
• B)$19.5 million
• C)$25.5 million
• D)$0 million

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Definitions:

Diseconomies of Scale

A condition in which a firm’s average costs increase as production increases.

Returns to Scale

The change in output as a result of proportionately changing all inputs in the production process, indicating increasing, constant, or decreasing returns.

Marginal Cost

An uplift in the sum total of costs incurred by producing another unit of a product or service.

Average Fixed Cost

The fixed costs of production (such as rent and salaries) divided by the number of goods produced; it decreases as output increases.