If the Target Reserve Ratio in the Banking System Is

question 2

Multiple Choice

If the target reserve ratio in the banking system is 1%,there is no cash drain,and there are no excess reserves,a new deposit of $1 will lead to an expansion of the money supply of

• A)$0.01.
• B)$1.10.
• C)$1.00.
• D)$10.00.
• E)$100.00.

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Definitions:

Linearly Related

Variables are linearly related if there is a consistent linear relationship between them, indicated by a straight-line graph.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, potentially affecting the stability of the model.

Linear Regression

A statistical method to model the relationship between a dependent variable and one or more independent variables by fitting a linear equation to observed data.

Predictor Variables

Variables in statistical models that are used to predict or explain changes in a dependent variable.