If the Required Reserve Ratio Is 10 Percent,currency in Circulation

question 62

Multiple Choice

If the required reserve ratio is 10 percent,currency in circulation is $400 billion,checkable deposits are $1,000 billion,and excess reserves total $1 billion,then the M1 money multiplier is

• A)2.5.
• B)2.8.
• C)2.0.
• D)0.7.

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Definitions:

Estimated Useful Life

The anticipated period over which an asset is expected to be used before it is fully depreciated.

Units-of-production

A method of depreciation based on an asset's usage, activity, or parts produced rather than passing time.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Molding Machine

A machine used in manufacturing to shape liquid or pliable material using a rigid frame called a mold or matrix.