Suppose That People Decide to Hold More Money as Cash

question 17

Multiple Choice

Suppose that people decide to hold more money as cash. Which statement best illustrates the impact of this action on the money multiplier? The money multiplier

• A)decreases because of the decrease in the currency drain ratio.
• B)increases because of the decrease in the currency drain ratio.
• C)increases because of a decrease in deposits.
• D)increases because of the increase in the currency drain ratio.
• E)decreases because of the increase in the currency drain ratio.

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Definitions:

Investment Performance

Investment performance measures how well an investment is doing, based on returns relative to risk and compared to a benchmark or other standard.

Systematic Risk

The risk of a collapse in an entire financial system or entire market, due to factors such as economic crises, which cannot be avoided through diversification.

Expected Return

The anticipated average return of an investment over a specific period, considering various probable outcomes.

Realized Return

The actual gain or loss experienced on an investment, calculated by taking the difference between the selling price and the purchase price.