If the Central Bank in Some Country Lowered the Reserve

question 420

Multiple Choice

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

• A)would increase.
• B)would not change.
• C)would decrease.
• D)could do any of the above.

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Definitions:

Compensating Balance

A minimum account balance that a company agrees to maintain in a bank account to offset the cost of banking services provided.

Effective Rate

The actual interest rate earned or paid on an investment, loan, or other financial product, taking into account the compounding effect.

Implied Annual Cost

An estimation of the cost associated with an investment or loan, calculated on a yearly basis, including interest, fees, and other charges.

Prompt Payment Discount

A discount offered to customers for paying their bills promptly, usually within a specified time frame to encourage faster payment.