If the Desired Reserve Ratio Is 20 Percent, the Simple

question 64

Multiple Choice

If the desired reserve ratio is 20 percent, the simple deposit multiplier is ________.

• A) 5.0
• B) 2.5
• C) 4.0
• D) 10.0

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Definitions:

Reserve Requirement

The mandatory percentage of deposits that banks must hold in reserve, either in their vaults or at the central bank, not available for lending.

Government Bond

A debt security issued by a government to support government spending and obligations, typically offering a fixed rate of return.

Money Supply

The comprehensive amount of money assets found in an economy at a noted time.

Checking Accounts

Bank accounts that allow for both deposits and withdrawals, enabling easy access for daily transactions.