The nation of Kocherlakota has a money supply equal to $\$ 10,000$ and a monetary base equal to $\$ 2,500$.

What is the money multiplier in Kocherlakota?

Choose 1 answer:
(A) 2.5
(B) 0.25
(C) 4
(D) $\$ 7500$
(E) This cannot be determined without knowing the reserve requirement

Question

The nation of Kocherlakota has a money supply equal to $\$ 10,000$ and a monetary base equal to $\$ 2,500$.

What is the money multiplier in Kocherlakota?

Choose 1 answer:
(A) 2.5
(B) 0.25
(C) 4
(D) $\$ 7500$
(E) This cannot be determined without knowing the reserve requirement

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ To calculate the money multiplier, we use the formula: $ Money\ Multiplier = \frac{Money\ Supply}{Monetary\ Base} $. ‖ ‖ step 2 ⋮ Substitute the given values into the formula: $ Money\ Multiplier = \frac{\$10,000}{\$2,500} $. ‖ ‖ step 3 ⋮ Perform the division to find the money multiplier: $ Money\ Multiplier = 4 $. ‖ ∻Answer∻ ‖ The money multiplier in Kocherlakota is 4. ‖ ***C*** ∻Key Concept∻ ⚹Money Multiplier⚹ ∻Explanation∻ ⚹The money multiplier is the ratio of the money supply to the monetary base, indicating how much the money supply is amplified by the banking system.⚹◊What is the formula for calculating the money multiplier in a given economy?⍭ Generate me a similar question◊

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