If the Target Reserve Ratio in the Banking System Is

question 52

Multiple Choice

If the target reserve ratio in the banking system is 1 percent, 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:

Natural Rate

The long-term rate of unemployment or economic output under prevailing conditions, considered sustainable without causing inflation.

Unemployment Rate

The percentage of employment-seeking individuals in the labor force who are without jobs.

Unemployment Benefits

Payments made by the government or a designated body to unemployed individuals, intended to provide financial assistance while they seek new employment.

Economic Growth

An increase in the output of goods and services in an economy over a period, often measured by the rise in Gross Domestic Product (GDP).