Which of the following is not true of the demand deposit multiplier?
a. Its formula is 1/RRR.
b. It represents the change in demand deposits generated by a change in reserves.
c. It represents the change in demand deposits generated by a change in taxes.
d. It is a way to determine the effect on money supply from a given Federal Reserve action.
e. It ignores changes in the behavior of the public and the banks.
C
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Which of the following schematics most accurately represents economic fluctuations during a business cycle?
A) Shock -> Spending response by households and firms -> Multiplier effect -> Change in real GDP B) Shock -> Multiplier effect -> Spending response by households and firms -> Change in real GDP C) Shock -> Multiplier effect -> Change in real GDP -> Spending response by households and firms D) Shock -> Change in real GDP -> Spending response by households and firms -> Multiplier effect
The concept of free trade is based on the principle that countries should specialize in the production of goods for which the
a. absolute advantage is highest b. absolute advantage is lowest c. opportunity cost is highest d. opportunity cost is lowest e. consumers have the highest demand