If a Deposit of $50 in the Banking System Can

question 205

Multiple Choice

If a deposit of $50 in the banking system can lead to a maximum expansion in bank deposits of $250, using the money multiplier formula, the required reserve ratio must be:

• A)20 percent.
• B)25 percent.
• C)40 percent.
• D)50 percent.

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Definitions:

Increase

An upward change or growth in a quantity or value.

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Consumer Goods

Physical products purchased by consumers for personal or household use.

Technology

The application of scientific knowledge for practical purposes, especially in industry and improvements in tools, machines, techniques, and software.