Suppose That in Mysore,the Reserve-Deposit Ratio Is Res = 0

question 89

Multiple Choice

Suppose that in Mysore,the reserve-deposit ratio is res = 0.5 - 2i,where i is the nominal interest rate.The currency-deposit ratio is 0.2 and the monetary base equals 100.The real quantity of money demanded is given by the money demand function L(Y,i) = 0.5Y - 10i,where Y is real output.Currently,the real interest rate is 5% and the economy expects an inflation rate of 5%.The reserve-deposit ratio equals

• A)0.1.
• B)0.2.
• C)0.3.
• D)0.4.

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Definitions:

Monthly Interest Rate

The interest rate applied on a monthly basis to loans or savings, affecting the amount of monthly interest payments or earnings.

Variable Cost

Costs that vary directly with the level of production or output.

Net Present Value

A valuation method that calculates the difference between the present value of cash inflows and outflows over a period, used to assess the profitability of an investment.

Accounts Receivable Approach

A method for estimating uncollectible accounts based on outstanding receivables, which can impact a company’s financial analysis and credit management policies.