If the Reserve Ratio Decreased from 10 Percent to 5

question 5

Multiple Choice

If the reserve ratio decreased from 10 percent to 5 percent, which of the following would happen to the money multiplier?

• A) It would rise from 10 to 20.
• B) It would rise from 5 to 10.
• C) It would fall from 10 to 5.
• D) It would fall from 20 to 5.

---

Definitions:

Moral Hazard

A situation where one party is more likely to take risks because another party bears the cost of those risks, often seen in insurance and financial sectors.

Federal Deposit

Funds deposited in a federal bank or a financial institution that is guaranteed by a government agency.

Insurance Program

A system of protection against financial loss in which risks are pooled and financial compensation is provided to members facing losses.

Congestion Pricing

A pricing strategy that charges users fees for accessing certain areas during peak times to reduce traffic congestion.