If the currency-depoist ratio equals 0.5 and the reserve-depoist ratio equals 0.1,then the money multiplier equals:
Question
If the currency-depoist ratio equals 0.5 and the reserve-depoist ratio equals 0.1,then the money multiplier equals:
Solution
The money multiplier is calculated using the formula:
Money Multiplier = 1 + Currency-Deposit Ratio / Reserve-Deposit Ratio + Currency-Deposit Ratio
Substituting the given values into the formula:
Money Multiplier = 1 + 0.5 / 0.1 + 0.5 Money Multiplier = 1 + 5 Money Multiplier = 6
So, the money multiplier equals 6.
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The simple money multiplier isGroup of answer choicesthe reciprocal of the required reserve ratio.always 1.the same as the required reserve ratio.different from bank to bank even if the required reserve ratio is the same for all banks.
The monetary multiplier ismultiple choiceinversely related to the reserve ratio.directly related to the reserve ratio.one plus the required reserve ratio.one minus the reserve ratio
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