Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 25, Problem 6MCQ
To determine
The correct option that is the money multiplier if deposit is $100,000 and reserve is $5,000.
Expert Solution & Answer
Answer to Problem 6MCQ
Option d is correct.
Explanation of Solution
Explanation for correct option:
d.
Money multiplier is equal to 1/reserve ratio. It can be calculated as follows:
Therefore, option d is correct.
Explanation for incorrect option:
Since, it is calculation based, other options are incorrect.
Economics Concept Introduction
Money multiplier: Money multiplier can be referred as the ratio between money supply and the monetary base.
Monetary base: Monetary base refers to the sum of currency in circulation and the bank reserve. The percentage of currency in circulation is usually higher than the bank reserves.
Chapter 25 Solutions
Krugman's Economics For The Ap® Course
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