As the required reserve ratio is decreased the money multiplier ?
Correct answer: C. increase
- A. could either increase or decrease
- B. decrease
- C. increase
- D. remain the same, as long as bank hold no excess reserves
Explanation
With no excess reserves, the simple money multiplier is the reciprocal of the required reserve ratio. Lowering that ratio therefore raises the multiplier and permits a larger deposit expansion.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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