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7. Changes in the currency ratio Recall the formula for the money supply multiplier: Money Supply Multiplier = 1+k ktritres where k stands for the currency ratio, r, stands for the required reserves ratio, and rex stands for the excess reserves ratio. Which of the following most accurately explains why the currency ratio, k, may decrease?

7. Changes in the currency ratio Recall the formula for the money supply multiplier: Money Supply Multiplier = 1+k ktritres where k stands for the currency ratio, r, stands for the required reserves ratio, and rex stands for the excess reserves ratio. Which of the following most accurately explains why the currency ratio, k, may decrease?

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: The Monetary System
Section: Chapter Questions
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7. Changes in the currency ratio Recall the formula for the money supply multiplier: Money Supply Multiplier = 1+k ktritres where k stands for the currency ratio, r, stands for the required reserves ratio, and rex stands for the excess reserves ratio. Which of the following most accurately explains why the currency ratio, k, may decrease? The public is holding less cash per deposit. The public is holding more cash per deposit. The required reserves exceed bank reserves. Suppose (r,+ rex) < 1 and the value of the currency ratio, k, decreases. Then the value of the money supply multiplier will the percentage change in the numerator is than the percentage change in the denominator. because
Transcribed Image Text:7. Changes in the currency ratio Recall the formula for the money supply multiplier: Money Supply Multiplier = 1+k ktritres where k stands for the currency ratio, r, stands for the required reserves ratio, and rex stands for the excess reserves ratio. Which of the following most accurately explains why the currency ratio, k, may decrease? The public is holding less cash per deposit. The public is holding more cash per deposit. The required reserves exceed bank reserves. Suppose (r,+ rex) < 1 and the value of the currency ratio, k, decreases. Then the value of the money supply multiplier will the percentage change in the numerator is than the percentage change in the denominator. because
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