Which of the Following Correctly Is the Money Multiplier

question 60

Multiple Choice

Which of the following correctly is the money multiplier?

• A) The required reserve ratio.
• B) 1/(1 − the required reserve ratio).
• C) 1/(required reserve ratio).
• D) 1/(1 − MPC).

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Definitions:

Transaction Recorded Twice

This refers to a bookkeeping error where a financial transaction is mistakenly entered into an accounting system more than once, potentially distorting financial statements.

Liabilities

Debts or financial responsibilities that a company has towards others, requiring settlement via the transfer of economic resources over a period.

Debits

Entries in accounting that represent an increase in assets or expenses, or a decrease in liabilities, equity, or income.

Credits

Accounting entries that increase liabilities or equity or decrease assets or expenses.