If the Ratio of Currency to Deposits (Cr) Increases, While

question 106

Multiple Choice

If the ratio of currency to deposits (cr) increases, while the ratio of reserves to deposits (rr) is constant and the monetary base (B) is constant, then:

• A) it cannot be determined whether the money supply increases or decreases.
• B) the money supply increases.
• C) the money supply decreases.
• D) the money supply does not change.

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Definitions:

Positive Feedback Loop

A process where the output of a system amplifies the initial condition, leading to an even greater output in a self-reinforcing cycle.

Negative Feedback Loop

A regulatory mechanism in which a system responds in a way that reverses the direction of a change, helping to maintain stability or equilibrium.

Mathematical Models

Quantitative representations of real-world phenomena constructed using mathematical language and symbols to predict or analyze behavior and events.

Canadian Journal Of Zoology

A peer-reviewed scientific journal that publishes research in the field of zoology, particularly concerning animal biology.