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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Definitions:

Diversification

A risk management strategy involving the allocation of investments among various financial assets, industries, or other categories to reduce exposure to any single asset or risk.

Joint Ventures

A type of business agreement involving two or more parties that pool their resources for the purpose of accomplishing a specific task.

Logistics

The detailed organization and implementation of a complex operation involving the movement of goods, services, or information from origin to consumption.

Conflicting Business Laws

Situations where different laws or regulations, possibly from different jurisdictions, apply to the same business activity, creating a conflict that businesses must navigate.