Assuming Initially That the Required Reserve Ratio = 15%,the Currency-Deposit

question 141

Multiple Choice

Assuming initially that the required reserve ratio = 15%,the currency-deposit ratio = 40%,and the excess reserve ratio = 5%,a decrease in the excess reserve ratio to 0% causes the M1 money multiplier to ________,everything else held constant.

• A)increase from 2.33 to 2.55
• B)decrease from 2.55 to 2.33
• C)increase from 1.67 to 1.82
• D)decrease from 1.82 to 1.67

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Definitions:

Treasury Stock

Initially issued shares that were subsequently repurchased by the company, leading to a decrease in the total number of shares on the market.

Par Common Stock

The nominal or face value assigned to common stock shares as recorded in the corporate charter, influencing the accounting of company stock transactions.

Cost Method

An accounting method where the investment is recorded at its acquisition cost, with no subsequent changes for increases or decreases in value.

Fiscal Year

A one-year period adopted by businesses and governments for accounting and financial reporting, which may or may not align with the calendar year.