The Banking System Has Just Experienced an Increase in Deposits

question 420

Multiple Choice

The banking system has just experienced an increase in deposits of $50,000. The currency drain ratio is 20 percent and the desired reserve ratio is 10 percent. What does the money multiplier equal?

• A) 4.00
• B) 3.33
• C) 0.25
• D) 10.00

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Definitions:

Fourteenth Amendment

An amendment to the United States Constitution granting citizenship to all persons born or naturalized in the U.S. and guaranteeing all citizens equal protection under the law.

Commerce Clause

A provision in the United States Constitution that empowers Congress to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

Federal Government

The national government of a federal country that shares power with states or provinces but has authority in matters of national concern.

Subject to Taxation

Describes income, goods, property, and other financial transactions that are considered taxable by the government.