Use the Information Below to Answer the Following Question

question 80

Multiple Choice

Use the information below to answer the following question.
Fact 8.7.1
The Bank of Speedy Creek has chosen the following initial balance sheet:

-Refer to Fact 8.7.1.Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek.If the currency drain ratio is 32 percent, what is the size of the money multiplier?

• A)1.25
• B)5.0
• C)2.7
• D)3.3
• E)4.0

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Definitions:

Direct Labor

Workers who are directly involved in the manufacturing of goods or provision of services, whose labor costs are directly attributed to the product or service.

Raw Materials

Fundamental substances utilized as the starting point in the manufacturing process to create products.

Predetermined Overhead

An estimated amount of overhead cost assigned to each unit of production in advance of the actual production.

Actual Manufacturing

The real and factual process of producing goods, as opposed to planned or estimated production.