Which of the Following Reduces the Money Multiplier

question 238

Multiple Choice

Which of the following reduces the money multiplier?

• A) banks loan all their excess reserves
• B) bank customers hold some of the loan proceeds as currency outside the banking system
• C) the Fed reduces the required reserve ratio
• D) banks impose a currency drain on bank customers
• E) the Fed sells U.S.government securities

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Definitions:

Comparative Advantage

The capability of an entity to generate a product or service with a lesser opportunity cost compared to others, resulting in enhanced trading efficiency.

Consumption Point

A specific point on a budget constraint that shows the combination of two goods that a consumer can afford.

Wheat

A staple grain that serves as a primary food source for a large portion of the world's population, used in a variety of products including bread, pasta, and cereal.

Cattle

Domesticated bovine animals raised for their meat (beef), milk, or hides, or as working animals.