(Table) Consider the T-Account in the Table A) the Potential Money Multiplier and the Actual Money Multiplier

question 88

Multiple Choice

(Table) Consider the T-account in the table. If the reserve requirement is 20%, then: $$\begin{array} { | l | l | } \hline \text { Assets } & \text { Liabilities } \\\hline \$ 14,000 \text { (cash) } & \begin{array} { l } \$ 50,000 \text { (checking account } \\\text { balances) }\end{array} \\\hline \$ 56,000 \text { (loans) } & \begin{array} { l } \$ 20,000 \text { (loan recipients' checking } \\\text { account balances) }\end{array} \\\hline\end{array}$$

• A) the potential money multiplier and the actual money multiplier are the same.
• B) the potential money multiplier is larger than the actual money multiplier.
• C) the potential money multiplier is smaller than the actual money multiplier.
• D) the actual money multiplier is zero.

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Definitions:

Expected Monetary Value

The predicted amount of money that an action or decision is expected to generate, considering all possible outcomes and their probabilities.

Index Funds

Mutual funds or exchange-traded funds designed to replicate the performance of a specific index, such as the S&P 500.

Day Trader

An individual who buys and sells financial instruments, such as stocks, within the same trading day, aiming to capitalize on short-term market fluctuations.

Investing

The act of dedicating resources (such as capital, time, or effort) to an endeavor with the expectation of achieving a profit or material result.