If $500 of New Reserves Generates $1000 of New Money

question 6

Multiple Choice

If $500 of new reserves generates $1000 of new money in the economy,then the money multiplier is

• A)2 and the reserve ratio is 50 percent.
• B)​2 and the reserve ratio is 2 percent.
• C)​0.5 and the reserve ratio is 50 percent.
• D)​0.5 and the reserve ratio is 2 percent.

---

Definitions:

Encoding

The process of converting information or data into a specific format for efficient processing, storage, or transmission.

Decoding

The process of interpreting or making sense of a message or information received.

General Equilibrium

The condition that exists when all markets in an economy are in simultaneous equilibrium.

Economic System

The organized way in which a country allocates resources and distributes goods and services in its society.