The hypothetical currency deposit ratio is 0.40 and the reserve deposit ratio is 0.30. The value of…
The money multiplier is (1 + c)/(c + r), where c is the currency-deposit ratio and r is the reserve-deposit ratio. Substitution gives (1 + 0.40)/(0.40 + 0.30) = 1.40/0.70 = 2.
Choose your answer
The hypothetical currency deposit ratio is 0.40 and the reserve deposit ratio is 0.30. The value of money multiplier is:
Answer and explanation
Correct answer C
The money multiplier is (1 + c)/(c + r), where c is the currency-deposit ratio and r is the reserve-deposit ratio. Substitution gives (1 + 0.40)/(0.40 + 0.30) = 1.40/0.70 = 2.
Practice for these exams
-
Telangana SET (TG SET)