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If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable
deposits are $1000 billion, and excess reserves total $1 billion, then the money supply is
____.
A) $10,000 billion
B) $4000 billion
C) $1400 billion
D) $10,400 billion
Answer: C
Diff: 2 Type: MC Page Ref: 393
Skill: Applied
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves
If the desired reserve ratio is ten percent, currency in circulation is $400 billion, and
chequable deposits are $1000 billion, then the money multiplier is approximately ____.
A) 2.5
B) 2.8
C) 2.0
D) 0.7
Answer: B
Diff: 2 Type: MC Page Ref: 393
Skill: Applied
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves
If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable
deposits are $1000 billion, and excess reserves total $1 billion, then the currency ratio is
____.
A) .25
B) .50
C) .40
D) .05
Answer: C
Diff: 2 Type: MC Page Ref: 393
Skill: Applied
Objective List: 16.4 Utilize a simple model of multiple deposit creation, showing how the
central bank can control the level of deposits by setting the level of reserves