Which of the following will make the real-world money multiplier smaller than the theoretical formula?
A. Banks actually hold fewer reserves than technically required by the Fed.
B. Banks actually make loans for more money than they have in excess reserves.
C. Banks may keep some excess reserves rather than loan it all out.
D. Consumers spend more than they have using credit cards.
Answer: C
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Monopoly is a prime example of a market failure that leaves potential Pareto improvements unexploited. This is demonstrated by the fact that
a. monopolies produce public goods rather than private goods b. monopolies substitute excludability for rivalry c. monopolies substitute rivalry for excludability d. the price in a monopolized market is less than the marginal cost of production e. the price in a monopolized market exceeds the marginal cost of production
An example of a price floor is
a. the regulation of gasoline prices in the U.S. in the 1970s. b. rent control. c. the minimum wage. d. any restriction on price that leads to a shortage.