The Formula for the Money Multiplier Is

question 76

Multiple Choice

The formula for the money multiplier is:

• A)1/e where e is the excess reserve ratio.
• B)1/r where r is the reserve ratio.
• C)1(1 − r)where r is the required reserve ratio
• D)1/c where c is the ratio of cash people hold to deposits.

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Definitions:

Cumulative Preferred Stock

Preferred stock where dividends accumulate if not paid as scheduled, needing to be fulfilled before common stock dividends.

Common Stock

A type of security that represents ownership in a corporation, giving shareholders voting rights and a claim on profits in the form of dividends.

Dividend

A disbursement from a corporation to its stockholders, often derived from earnings.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with dividend priority.