ECONOMICS
FISCAL POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Given that the reserve ratio is 2, 5%, the size of the credit multiplier is
|
|
4
|
|
|
2, 5
|
|
|
25
|
|
|
40
|
Explanation:
Detailed explanation-1: -Answer and Explanation: 1. If the reserve ratio is 20 percent, the money multiplier is c. 5.
Detailed explanation-2: -A money multiplier of 2.5 means that: given the required reserve ratio of 0.1 on checkable deposits, currency to deposits ratio of 0.5 and the excess reserve ratio equal to zero, an increase in the monetary base by $1 leads to an increase in the money supply by $2.5.
Detailed explanation-3: -Credit multiplier = Change in demand deposits of the commercial banksChange in cash reserves of the commercial banks with the RBI. Q.
Detailed explanation-4: -The required reserve ratio is 0.25 when the money multiplier is 4.
There is 1 question to complete.