If the Reserve-Deposit Ratio Is Less Than 1, and the Monetary

question 26

Multiple Choice

If the reserve-deposit ratio is less than 1, and the monetary base increases by $1 million, then the money supply will:

• A)increase by $1 million.
• B)decrease by $1 million.
• C)increase by more than $1 million.
• D)decrease by more than $1 million.

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Definitions:

Cash Ratio

A liquidity metric that measures a company's ability to pay off its short-term liabilities with its cash and cash equivalents alone.

Price-Earnings Ratio

The price-earnings ratio (P/E ratio) measures a company's current share price relative to its per-share earnings, used by investors to evaluate the valuation and potential for future earnings growth of a stock.

Earnings Per Share

A company's profit divided by its number of common outstanding shares, serving as an indicator of the company’s profitability.

Shares Outstanding

The total number of shares of stock that have been issued by a company and are currently held by investors, including public shareholders and company insiders.