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Assuming initially that r = 10 percent and c = 40 percent, an increase in r to 15 percent
causes ____.
A) the money multiplier to increase from 2.55 to 2.8
B) the money multiplier to decrease from 2.8 to 2.55
C) the money multiplier to increase from 1.82 to 2
D) no change in the money multiplier
Answer: B
Diff: 3 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
Assuming initially that r = 10 percent and c = 40 percent, a decrease in r to 5 percent causes
____.
A) the money multiplier to increase from 2.8 to 3.11
B) the money multiplier to decrease from 3.11 to 2.8
C) the money multiplier to increase from 2 to 2.22
D) the money multiplier to decrease from 2.22 to 2
Answer: A
Diff: 3 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 $800 billion, and excess reserves total $0.8 billion, then the money supply is
____.
A) $8000 billion
B) $1200 billion
C) $120 billion
D) $8400 billion
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