Refer to the Information Provided in Scenario 10

question 191

Multiple Choice

Refer to the information provided in Scenario 10.1 below to answer the questions that follow.
SCENARIO 10.1: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.
-Refer to Scenario 10.1. What is the money multiplier in this economy?

• A) 10
• B) 16.67
• C) 20
• D) 50

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Definitions:

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the reduction in value owing to wear and tear, age, or obsolescence.

Sensitivity Analysis

The study of how the variation in the output of a model can be apportioned, qualitatively or quantitatively, to different sources of variation in the input of a model.

Fixed Costs

Expenses that do not change with the level of production or output over the short term, such as rent or salaries.

Variable Cost

Expenses that change in proportion to the amount of production or output levels.