Which of the Following Would Reduce the Money Multiplier

question 360

Multiple Choice

Which of the following would reduce the money multiplier?

• A) The purchase of bonds by the Fed
• B) Lowering the reserve ratio
• C) Increases in the reserve ratio
• D) A flow of currency into the banking system

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Definitions:

Check

A special draft that orders a bank (the drawee) to pay a specified sum of money to the payee from the drawer’s account.

Unqualified

Without any conditions, limitations, or reservations; often referring to an endorsement or opinion that has no restrictions.

Blank Endorsement

An endorsement on a financial instrument with only the signature of the endorser, making it payable to whoever holds the document.

Bearer Paper

An instrument that is not made out to a specific person and can be transferred by possession alone, allowing the holder to claim the rights of the paper.