How does a currency drain affect the money multiplier?
What will be an ideal response?
If the currency drain is zero so that all money created is deposited in bank accounts, the money multiplier is equal to one divided by the desired reserve ratio. If the currency drain is positive, then some newly created money is held in cash and is not deposited in bank accounts. In this case, the money multiplier is smaller so that a change in the monetary base leads to a smaller change in the quantity of money.
You might also like to view...
Four major areas of government expenditure in the United States include:
a. national defense, Social Security, healthcare, and interest payments. b. national defense, Social Security, healthcare, and environmental protection. c. national defense, Social Security, international affairs, and interest payments. d. national defense, Social Security, international affairs, and environmental protection.
In order of their occurrence, the phases of the business cycle are:
A. peak, downturn, trough, upturn. B. peak, upturn, downturn, trough. C. peak, downturn, upturn, trough. D. peak, upturn, trough, downturn.
If it takes $1 to buy 100 yen, then the exchange rate ______.
a. is 100 yen per $1 from the U.S. perspective and is $1 per 100 yen from the Japanese perspective b. is $100 per 1 yen from the Japanese perspective and is $1 per 100 yen from the U.S. perspective c. is $1 per 100 yen from the U.S. perspective and is 1 yen per $0.01 from the Japanese perspective d. is $1 per 100 yen from the Japanese perspective and 100 yen per $1 from the U.S. perspective
If a household earning $50,000 annually pays $10,000 in taxes while a household earning $100,000 annually pays $15,000 in taxes, then the tax system is
A. reducing income inequality. B. discriminatory. C. regressive. D. progressive.