If the Required Reserve Ratio Is 10 Percent,currency in Circulation

question 122

Multiple Choice

If the required reserve ratio is 10 percent,currency in circulation is $1,200 billion,checkable deposits are $1,600 billion,and excess reserves total $2,500 billion,then the M1 money multiplier is

• A)2.5.
• B)1.7.
• C)7.3.
• D)0.73.

---

Definitions:

Consumer Price Index (CPI)

A standard for measuring the weighted average expenditure on a compilation of consumer products and services such as transportation, healthcare, and food.

Base Period

A specific time interval used as a reference point for comparing economic or financial data over different periods for analysis or index calculation purposes.

Price of Gas

The cost per unit of gasoline, influenced by factors such as crude oil prices, taxes, demand, and supply conditions.

Product-Improvement Bias

The tendency in the calculation of inflation to not fully account for improvements in product quality, which can lead to an overestimation of inflation rates.