If the Monetary Base Fell and the Currency-Deposit Ratio Rose

question 41

Multiple Choice

If the monetary base fell and the currency-deposit ratio rose but the reserve-deposit ratio remained the same, then:

• A)the money supply would fall, but not by as much as it would have fallen if the reserve-deposit ratio had risen.
• B)the money supply would fall, but not by as much as it would have fallen if the reserve-deposit ratio had fallen.
• C)the money supply would fall more than it would have fallen if the reserve-deposit ratio had
• D)risen. it is impossible to be certain whether the money supply would fall or rise in this case.

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Definitions:

Tax Imposed

Levies set by government authorities on various forms of income, consumption, or transactions, used to fund public services and infrastructure.

Deadweight Loss

An economic inefficiency that occurs when the total welfare in a market is not maximized, resulting from distortions such as taxes, subsidies, or monopolies.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.

Tax Revenues

Tax revenues are the income that governments collect from individuals, corporations, sales, and other sources, used to fund public services and operations.