Assuming Initially That the Required Reserve Ratio = 10%,the Currency-Deposit

question 133

Multiple Choice

Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 40%,and the excess reserve ratio = 0,a decrease in the required reserve ratio to 5% causes the M1 money multiplier to ________,everything else held constant.

• A)increase from 2.8 to 3.11
• B)decrease from 3.11 to 2.8
• C)increase from 2 to 2.22
• D)decrease from 2.22 to 2

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