"If the currency drain ratio increases, the monetary base decreases." Explain whether the previous statement is correct or incorrect
What will be an ideal response?
The statement is false. If the currency drain ratio increases, the money multiplier (and the quantity of money) decreases but the monetary base itself is unaffected.
You might also like to view...
The figure shows the market for college education. In order for the efficient amount of education to occur, the government could provide a subsidy of ________ per student
A) $4,000 B) $8,000 C) $12,000 D) $20,000 E) $16,000
If a perfectly competitive firm wants to make any sales, what is the basis for pricing its goods?
a. Prevailing market price b. Average variable cost c. Desired marginal revenue d. Market penetration price
When a price floor is imposed above the equilibrium price of a commodity,
a. quantity demanded will be greater than quantity supplied for the good. b. the quantity demanded by consumers will be greater than at the equilibrium price. c. a shortage of the good will develop. d. a surplus of the good will develop.
Which of the following could lead to an inward shift of the production possibilities frontier?
a) an increase in the cost of one good b) an increase in the utilization of resources c) a rise in the level of technology d) a law is passed whereby a mandatory retirement age of 60 is imposed, from an original age of 65 e) a decrease in the utilization of resources