If the Required Reserve Ratio Is a Uniform 25 Percent

question 68

Multiple Choice

If the required reserve ratio is a uniform 25 percent on all deposits, the money multiplier will be:

• A) 4.00.
• B) 2.50.
• C) 0.40.
• D) 0.25.

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Definitions:

Equilibrium Price

Equilibrium price is the price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.

Consumer Surplus

The difference in the total expected payment consumers are ready to make for a good or service and their actual expenditures.

Producer Surplus

The difference between the actual amount received by sellers for a product and the least amount they would be willing to accept, representing the net benefit to producers.

Excess Supply

Occurs when the quantity of a good or service supplied is greater than the quantity demanded, often leading to a decrease in price.