If the Ratio of Currency to Transaction Accounts Is 2

question 18

Multiple Choice

If the ratio of currency to transaction accounts is 2, the ratio of nontransaction accounts to transaction accounts is 5, the ratio of retail money-market funds to transaction accounts is 1, the ratio of required reserves to transaction accounts is 0.08, and the ratio of excess reserves to transaction accounts is 0.02, the M1 multiplier is about

• A)1.42.
• B)2.12.
• C)2.81.
• D)4.24.

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Definitions:

Chi-square Test of Independence

A statistical test used to determine if there is a significant association between two categorical variables.

Test Statistic

A standardized value used in statistical hypothesis testing to decide whether to reject the null hypothesis.

Critical Value

A statistical threshold value used in hypothesis testing to determine whether to reject the null hypothesis, based on the desired level of significance.

Contingency Table

A table used in statistics to show the frequency distribution of variables, and analyze the relationship between categorical variables.