If the Required Reserve Ratio Is 20 Percent and Commercial

question 67

Multiple Choice

If the required reserve ratio is 20 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the effective monetarymultiplier for the bankingsystemwill be

• A)3.
• B)4.
• C)5.
• D)6.

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Definitions:

Ending Accounts Receivable

The amount of money owed to a company by its customers for goods or services delivered or used but not yet paid for at the end of an accounting period.

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership stake of shareholders.

Net Plant

The net book value of a company’s plant assets, typically representing the total cost of these assets minus accumulated depreciation.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for daily operations.