Given the Reserve-Holding Ratio E and the Fraction of Deposits

question 4

Multiple Choice

Given the reserve-holding ratio e and the fraction of deposits held as cash c, the money multiplier becomes

• A) ec/(e - c).
• B) (1 + c)/(e + c).
• C) (1 - c)/ec.
• D) 1 - e - c.
• E) ec - (1/c).

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Definitions:

Profit

The financial gain realized when the revenue earned from selling goods or services exceeds the costs, expenses, and taxes needed to sustain the activity, indicating the financial success of a business.

Total Revenue

The total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.

Profit

The financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Economic Profits

Profits exceeding the total cost of capital, including both the cost of debt and the opportunity cost of equity capital.