If the Desired Reserve Ratio Is Ten Percent, Currency in Circulation

question 144

Multiple Choice

If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable deposits are $1000 billion, and excess reserves total $1 billion, then the monetary base is ________.

• A) $400 billion
• B) $401 billion
• C) $500 billion
• D) $501 billion

---

Definitions:

Disposable Income

Disposable income for households after accounting for income taxes, meant for spending and saving.

Marginal Propensity

The ratio of change in an economic variable, such as consumption or saving, to a change in another variable, like income.

Disposable Income

The net income available to individuals or households after taxes have been deducted, available for spending, saving, or investing.

Consumption

The act of using goods and services by households, contributing to the overall demand in an economy.