Use the Information Below to Answer the Following Question

question 83

Multiple Choice

Use the information below to answer the following question.
Fact 24.7.1
The Bank of Speedy Creek has chosen the following initial balance sheet:

-Refer to Fact 24.7.1. Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek. If the currency drain ratio is 32 percent, what is the size of the money multiplier?

• A)3.3
• B)1.25
• C)5.0
• D)4.0
• E)2.7

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Definitions:

Cross-elasticity of Demand

A measure of how the quantity demanded of one good responds to a change in the price of another good, indicating substitutes or complements.

Normal Goods

Items for which demand increases as consumer income rises, showing a positive correlation between income and demand.

Law of Supply

A fundamental principle stating that, all else being equal, an increase in the price of a good will result in an increase in the quantity supplied.

Price-elasticity of Supply Coefficient

A numerical measure of how much the quantity supplied of a good responds to a change in its price.