If the Money Multiplier Decreased from 20 to 12

question 83

Multiple Choice

If the money multiplier decreased from 20 to 12.5,then

• A)the Fed increased the reserve ratio from 5 percent to 8 percent.
• B)the Fed increased the fed funds rate from 5 percent to 8 percent.
• C)the Fed decreased the reserve ratio from 8 percent to 5 percent.
• D)the Fed decreased the fed funds rate from 8 percent to 5 percent.

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Definitions:

Income

Compensation acquired from job employment or the act of investing, usually in a regular pattern.

Price

The expected financial outlay, required, or dispensed in payment for something.

Claret

A red wine from Bordeaux, France, or a wine of similar character from elsewhere.

Demand Function

A mathematical representation of the relationship between the quantity demanded of a good and its determining factors, such as price and consumer income.