Consider the Currency-Deposit Ratio (CDR) in an economy is 0.05, its Reserve-Deposit Ratio (RDR) is…
The money multiplier is \(m=(1+c)/(c+r)\), where \(c\) is the currency-deposit ratio and \(r\) is the reserve-deposit ratio. Thus \(M\) \(=Hm\) \(=100(1.05)/(0.05+0.05)\)…
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Consider the Currency-Deposit Ratio (CDR) in an economy is 0.05, its Reserve-Deposit Ratio (RDR) is 0.05 and its stock of High Powered Money (H) is 100. Calculate the Stock of Money (M) of that economy:
Answer and explanation
Correct answer C
The money multiplier is , where is the currency-deposit ratio and is the reserve-deposit ratio. Thus .
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Kerala SET (LBS Centre)