If the Reserve Ratio Decreases from 20 Percent to 10

question 173

Multiple Choice

If the reserve ratio decreases from 20 percent to 10 percent, then the potential money multiplier

• A) increases from 5 to 10.
• B) decreases from 10 to 5.
• C) does not change.
• D) decreases from 20 to 10.

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Definitions:

Comparative Advantage

The ability of an individual or economy to produce goods or services at a lower opportunity cost than competitors, leading to more efficient trade and production.

Microwave Oven

An electric oven that uses microwaves to heat or cook food by inducing polar molecules in the food to rotate and produce thermal energy.

Balance of Trade Surplus

A condition where a country's exports exceed its imports, resulting in a positive balance of trade.

Net Exports

The difference between a country's total value of exports and its total value of imports. If exports exceed imports, net exports are positive; if imports exceed exports, net exports are negative.