When the Required Reserve Ratio Is Changed

question 64

Multiple Choice

When the required reserve ratio is changed,

• A) the money multiplier is changed but the amount of excess reserves in the banking system is unchanged.
• B) the money multiplier is unchanged but the amount of excess reserves in the banking system is changed.
• C) the size of the money multiplier and the amount of excess reserves change in the opposite direction from the required reserve ratio.
• D) the size of the money multiplier and the amount of excess reserves change in the same direction as the required reserve ratio.

Develop critical thinking through the application of probability to decision-making.

Understand the differences between direct quotations, paraphrasing, and summarizing.

Recognize and avoid plagiarism by properly citing sources.

Comprehend the correct use of quotation marks with direct quotations.

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Definitions:

Cost of Equity

The return that investors expect for providing capital to a company, effectively the compensation for the risk of investing in the company.

Debt-Equity Ratio

An indicator of a business's financial risk, computed by dividing the total amount of its liabilities by the equity owned by shareholders.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk associated with holding the company's stocks.

Unlever

The process of reducing or eliminating debt from a company's balance sheet, often aiming to improve financial stability.