The Fed buys $50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?
What will be an ideal response?
When the Fed buys $50,000 of government securities from Commerce Bank, Commerce Bank's total reserves increase by $50,000. However, because Commerce Bank's deposits have not changed, none of these additional reserves are desired reserves, so Commerce Bank's excess reserves also increase by $50,000.
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Indicate whether the statement is true or false
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a. greater than +1 b. between 0 and +1 c. zero d. infinity
As a firm continues to produce additional output, which of the following will continue to decline as output expands?
A) average total costs B) marginal costs C) average fixed costs D) opportunity costs